Poonawalla Fincorp Ltd Management Discussions

ECONOMIC OVERVIEW Global Economy

The global economy demonstrated commendable resilience in CY 2024, navigating a complex landscape marked by divergent regional performances, persistent geopolitical tensions, and shifting monetary dynamics. Global output expanded by 3.2% in 2023 and 3.3% in 20241, maintaining a stable growth trajectory, albeit still lagging behind the stronger momentum observed in the prepandemic era.

This steady performance was underpinned by a mix of factors, including moderating inflation and resilient labour markets that contributed to a cautiously optimistic outlook. Looking ahead, global output is projected to grow at a slightly slower pace of 2.8% in 20252, reflecting ongoing challenges but also recovery in key sectors.

Labour markets, while gradually cooling, remained historically strong in 2024. Unemployment rates stayed low across major economies, and nominal wages continued to rise. These positive labour market trends, along with disinflationary pressures, contributed to a modest improvement in real household incomes in 2024. However, consumer sentiment remained fragile, and private consumption growth in several advanced economies was subdued in 2024, with only a slight recovery expected in 2025. Projections suggest private consumption growth will stabilise in 2025, aided by improving economic conditions and modest wage gains.

Economic performance varied considerably across regions. The United States outperformed expectations, driven by robust domestic demand and a resilient services sector. In contrast, the Eurozone continued to grapple with structural weaknesses, high energy costs, and tepid business investment, resulting in lacklustre growth. Among emerging markets, India stood out with strong and broad-based expansion, powered by domestic consumption, infrastructure investment, and digitalisation initiatives. China, however, faced headwinds from a slowing property market, weak consumer confidence, and structural rebalancing, which tempered its growth trajectory.

Geopolitical developments continued to cast a long shadow over global economic prospects. The ongoing war in Ukraine and heightened tensions in the Middle

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East disrupted energy flows and trade corridors, fuelling market uncertainty. Financial markets, in turn, experienced episodes of volatility, influenced by shifting interest rate expectations, inflation dynamics, and geopolitical risks.

Outlook

The global economy is facing renewed pressure in 2025, primarily driven by escalating trade tensions. Following a period of modest but consistent growth in 2024, the implementation of broad-based U.S. tariffs, accompanied by countermeasures, has significantly heightened trade policy uncertainty. Consequently, the International Monetary Fund (IMF) has revised global growth projections to 2.8%3 in 2025 and 3.0% in 2026, both below the historical average of 3.7%, reflecting a cumulative downgrade of 0.8 percentage points from previous forecasts.

Advanced economies are expected to experience slower growth, with the United States projected to grow at 1.8%, and the euro area at 0.8%4. This downturn is attributed to weaker demand, increased uncertainty, and the economic repercussions of trade restrictions. Emerging market and developing economies, particularly those directly impacted by the new tariffs, such as China, are also forecast to see slower growth, with projections of 3.7% in 2025.

Inflation is anticipated to decline gradually than previously expected. Global headline inflation is projected at 4.3% in 20255, with revisions upwards for advanced economies and slight downward adjustments for emerging markets.

The outlook is shaped by significant downside risks, including the possibility of a deeper trade conflict, financial market volatility, currency shocks, and rising debt vulnerabilities, particularly in low-income economies. Demographic challenges and the ongoing impact of recent cost-of-living pressures may further constrain recovery and exacerbate social tensions.

Policy priorities should focus on restoring trade predictability, promoting international cooperation, and addressing domestic structural weaknesses. Governments are advised to rebuild fiscal buffers, implement credible medium-term consolidation plans, and pursue labour and market reforms. Central banks must continue balancing inflation control with financial stability while preparing to respond to increased volatility.

While uncertainty remains high, coordinated global efforts and a de-escalation of trade tensions may support stabilisation and contribute to a more sustainable recovery.

Indian Economy

Indias economy showed strong growth in FY 202324 of 8.2% and 6.5%6 for FY 2024-25 aligning with its long-term average. This performance was primarily driven by a revival in rural demand and sustained consumption momentum, with private final consumption expenditure rising by about 7.3%7. Easing inflationary pressures, with retail inflation falling to 4.6%8, its lowest since FY 2018-19—further contributed to economic stability.

Over the past decade, India has emerged as the fastest-growing major economy, doubling its GDP from USD 2.1 trillion in FY ending on March . 2015 to USD 4.2 trillion in FY ending on March . 2025. This exceptional rise outpaced all other major economies, underscoring Indias emergence as a formidable global economic force. The transformation was fueled by a combination of structural reforms, rapid digitalisation, and a favourable demographic profile. Strategic investments in digital infrastructure, financial inclusion, and manufacturing boosted domestic productivity, while a booming services sector particularly in IT and financial services remained a consistent engine of growth.

Public investments in infrastructure and a push for self-reliance in critical sectors propelled the economy forward. India is now poised to overtake Japan (USD 4.4 trillion GDP) to become the worlds fourth-largest economy, and maintaining its current trajectory, it could surpass Germany (USD 4.9 trillion) by 2027 to take third place. These projections highlight the strength of Indias macroeconomic fundamentals, supported by prudent policies, a stable banking sector, and steady fiscal consolidation.

Inflation, though occasionally affected by food prices, largely stayed within the RBIs target band. Nonperforming assets reached multi-year lows, and Indias economy continued to demonstrate strength, with GDP growing by 6.5% in FY 2024-25.

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Outlook

For CY 2025, Indias GDP growth is expected to moderate, with projections of 6.2%9 indicating a marginal slowdown compared to previous periods of stronger domestic demand-driven expansion. Rural recovery is likely to strengthen further, supported by a normal monsoon forecast, while urban consumption is expected to remain steady, backed by improving labour markets and lower interest rates.

Retail inflation is anticipated to stay near the RBIs medium-term target of 4.6%10, maintaining a conducive environment for potential incremental policy easing. This could support credit expansion and broader economic activity, particularly in interest rate-sensitive segments.

Fiscal consolidation is expected to progress gradually, balancing growth support with fiscal discipline. Public investment particularly in infrastructure, logistics, and energy will remain a key lever for driving productivity gains. Moreover, the cumulative impact of earlier structural reforms and digitalisation efforts is likely to enhance the efficiency of financial intermediation and formal sector participation.

While Indias growth outlook remains robust, global uncertainties ranging from trade disruptions and energy price volatility to geopolitical tensions pose potential risks. However, Indias relatively strong macroeconomic fundamentals, large domestic market, and policy flexibility position it favorably to navigate external shocks and sustain medium- term growth.

INDUSTRY OVERVIEW

Non-Banking Financial Companies (NBFCs)

Non-Banking Financial Companies (NBFCs) play a pivotal role in Indias financial ecosystem, catering to a wide spectrum of borrowers including MSMEs and financially underserved populations thereby advancing financial inclusion and generating employment across the country. Leveraging their deep market understanding and widespread geographic reach, NBFCs have efficiently addressed diverse credit needs with agility and responsiveness. In FY 2023-24, the sector continued to anchor credit growth, with assets under management

(AUM) reaching approximately RS. 47 trillion11 and is projected to reach RS. 53.7 trillion as on March . 31, 2025. Growth was primarily driven by robust retail lending activity and demand from small businesses, despite increased regulatory scrutiny such as enhanced risk weights on unsecured loans and tighter supervision of riskier segments.

Growth of NBFCs reflects the customer value proposition offered by them

Source: CRISIL M&A

In FY 2025-26, the sector is expected to benefit from supportive macroeconomic measures. Budgetary tax reliefs and sustained repo rate cuts are likely to increase disposable income and enhance loan eligibility, offering a tailwind to credit expansion. Strategic public investments and digital lending innovations are also set to drive operational efficiency and sustained growth across the NBFC landscape.

Looking ahead, NBFC AUM is expected to cross RS. 60 trillion in FY 2025-26. However, credit growth is projected to moderate to 13-15% lower than the 17% average seen over the past two years reflecting a high base, recalibrated risk strategies, and more conservative growth approaches in unsecured lending. Despite this, the sector remains on a strong footing, buoyed by continued retail demand, digital transformation, and its integral role in Indias broader financial inclusion journey.

Outlook

The NBFC sector is poised for stronger growth in FY 2025-26, supported by recent repo rate cuts by the Reserve Bank of India and changes in income tax slabs aimed at boosting consumer spending. According to a CRISIL report, AUM growth is expected to recover to 16-18%12 in FY 2026-27, following a moderation in FY 2025-26. The report also projects stable overall asset quality for the sector in the current fiscal.

With the RBI partially rolling back the earlier hike in risk weights on bank lending to NBFCs, credit flow to the sector is expected to ease. While such loans grew at a robust 15% annually between FY 2023-24 and FY 2024-25, the growth decelerated to 6.7% by February 2025. However, lending is now projected to return to double-digit growth.

The MSME segment, which accounts for 16% of overall credit grew by ~ 22.22% in FY 2024-25, is also expected to witness steady growth of ~23% in FY 2025-26. This will be supported by targeted government initiatives, greater digitalisation and formalisation, and improved access to data. These developments have enabled lenders to enhance their credit assessment models and more effectively serve the rising demand from this critical sector of the economy.

OVERVIEW OF UNDERLYING SEGMENTS

Automobile

The Indian automobile industry witnessed healthy growth in FY 2024-25, with domestic sales rising 7.3% and exports up 19.2%, driven by strong demand, infrastructure push, and supportive policies. Positive economic conditions and growing focus on sustainable mobility further supported the sectors momentum.

Passenger Vehicles reached record sales of 4.3 million units, growing 2%, with Utility Vehicles forming 65% of total PV sales. Exports grew 14.6% to 0.77 million units, led by demand from Latin America, Africa, and new developed markets. Two-Wheelers saw a 9.1% rise to 19.6 million units, with exports up 21.4% at 4.2 million units. Growth was aided by improved rural demand and newer, feature-rich models.

Three-Wheeler sales hit a peak of 7.4 lakh units, up 6.7%, driven by passenger demand and urban mobility needs. Commercial Vehicles saw a slight dip of 1.2%, though exports jumped to 23%. EV registrations rose 16.9% to 1.97 million units, supported by government schemes like EMPS, PM E-DRIVE, and PM e-Sewa. The Indian automobile sector entered a phase of recalibration in FY 2024-25 following multiple years of robust expansion. While headline volume growth moderated due to base effects and inventory rationalisation, consumer demand fundamentals remained strong. The sector continues to benefit from steady income growth, favourable financing conditions and supportive policy interventions.

Automobile Domestic Sales Trends

Category	2019-20	2020-21	2021-22	2022-23	2023-24	2024-25
Passenger Vehicles	27,73,519	27,11,457	30,69,523	38,90,114	4218,750	43,01,848
Commercial Vehicles	7,17,593	5,68,559	7,16,566	9,62,468	9,68,770	9,56,671
Three Wheelers	6,37,065	2,19,446	2,61,385	4,88,768	6,94,801	7,41,420
Two Wheelers	1,74,16,432	1,51,20,783	1,35,70,008	1,58,62,771	1,79,74,365	1,96,07,332
Quadricycles	942	-12	124	725	725	120
Grand Total	2,15,45,551	1,86,20,233	1,76,17,606	2,12,04,846	2,38,57,411	2,56,07,391
Automobile Exports Trends
Category	2019-20	2020-21	2021-22	2022-23	2023-24	2024-25
Passenger Vehicles	6,62,118	4,04,397	5,77,875	6,62,891	6,72,105	7,70,364
Commercial Vehicles	60,379	50,334	92,297	78,645	65,818	80,986
Three Wheelers	5,01,651	3,93,001	4,99,730	3,65,549	2,99,977	3,06,914
Two Wheelers	35,19,405	32,82,786	44,43,131	36,52,122	34,58,416	41,98,403
Quadricycles	5,185	3,529	4,326	2,280	4,178	6,422
Grand Total	47,48,738	41,34,047	56,17,359	47,61,487	45,00,494	53,63,089

Commercial Vehicles (CVs)

The Commercial Vehicle segment saw a marginal de-growth of 1.2% in FY 2024-25 compared to the previous fiscal. However, the last quarter of the fiscal registered a positive uptick of 1.5%, indicating signs of recovery. While the overall truck segment experienced a slight decline, freight movement needs were adequately met through a shift towards higher gross vehicle weight (GVW) fleets. This transition was supported by the rapid expansion of highways and expressways, which played a key role in reducing logistics costs and improving regional connectivity. Additionally, infrastructure development contributed to increased demand for buses, both for inter-city travel and for mass mobility solutions in urban areas. On the external front, Commercial Vehicle exports recorded a robust growth of 23%, reaching 0.81 lakh units, reflecting stronger international demand and improved market access.

The commercial vehicle segment experienced a mixed performance, marked by subdued demand in certain sub-segments. However, structural drivers such as increased infrastructure investment, freight movement, and fleet renewal initiatives are expected to aid recovery. ICRA13 estimates:

In FY 2025-26:

• Overall CV growth of 3-5%

• Bus segment growth of 8-10%, driven by public fleet replacements

• Light Commercial Vehicles (LCVs): 3-5%

• Medium & Heavy Commercial Vehicles (MHCVs): 0-3%, supported by economic activity and regulatory support like the vehicle scrappage policy

Pre-owned Car Loan Market

The pre-owned vehicle financing segment is undergoing transformation, supported by rising demand and improving formal credit access. Finance penetration in this segment currently stands at ~23%. NBFCs are playing a pivotal role, particularly in Tier 2 and Tier 3 markets, where their share of financing is expected to grow from 48% to 55%. The expansion is driven by better digital onboarding, customer familiarity with formal credit, and tailored loan offerings that improve affordability for aspirational buyers outside metro cities.

In calendar year 2024, Indias pre-owned car market surpassed new car sales, with approximately 1.3 used cars sold for every new car. This trend is expected to strengthen over time, and by CY 2030, the ratio is projected to reacRs. 1.7:1 — meaning that for every 10 new cars sold, around 17 used cars will be purchased. The used car market is poised for robust growth, with annual sales estimated to rise to 4.6 million units by CY 2030, reflecting a healthy compound annual growth rate (CAGR) of 13%.

USED CAR MARKET Financing Trends In 2024

Loan Against Property (LAP) and SME Loans

In FY 2024-25, the Loan Against Property (LAP) and MSME lending segments exhibited strong growth, reinforcing their position as key drivers of secured and small business financing in India. The LAP market was valued at USD 75816 billion during the year, underpinned by increasing formalisation of credit demand, rising property ownership, and greater liquidity requirements among both salaried and self-employed borrowers. Offering competitive interest rates, flexible tenures, and streamlined documentation, LAP has emerged as an attractive credit solution. Growth in the segment has been further catalysed by the adoption of digital lending platforms and customised product offerings, particularly in Tier 2 and Tier 3 cities, where the monetisation of self-owned residential and commercial properties continues to expand the market base. The segment is projected to grow at a CAGR of 13.28%, reaching USD 1,598.23 billion by 2030, with commercial properties as the fastest- growing collateral category and southern India leading regional demand.

In parallel, MSME lending by NBFCs saw robust momentum, with loan books growing over 25% year- on-year to surpass RS. 4.2 lakh crore17. Asset quality improved significantly, as Gross NPAs declined to 2.3% by Q2 FY 2024-25, supported by enhanced underwriting practices and recovery mechanisms. A large credit gap of over RS.103 trillion persists in the MSME sector, with only 25%18 of demand currently

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Consumer and Personal Loan

The personal loan segment in India experienced a significant slowdown in FY 2024-25. In FY 2024-25, personal loan growth decelerated to 14.9%19 year- on-year, down from 17.6% in the previous year. This trend continues into FY 2025-26, with personal loan growth further declining to 9.2% in January 2025, compared to 20.8% in January 2024. The slowdown is attributed to tighter lending norms and increased risk weights on unsecured loans, implemented by the RBI to curb excessive credit expansion and mitigate systemic risks.

Despite the overall deceleration, banks continue to focus on salaried borrowers in Tier 1 cities, while nonbanking financial companies (NBFCs), particularly fintechs, have expanded their presence by offering lower-ticket-size loans to non-metro customers, enabled by fintech-NBFC collaborations and improved data analytics for underwriting.

Gold Loans

In FY2024-25, non-banking financial companies (NBFCs) were projected to expand their retail gold loan portfolios by 17% to 19%20, driven primarily by elevated gold prices and a shift in borrower preference away from unsecured credit. Despite intensifying competition from banks, particularly public sector banks expanding their agri-gold loan portfolios, NBFCs continued to maintain a strong presence in the retail gold loan segment. As of September 2024, their gold loan assets under management (AUM) stood at RS.1.8 trillion.

The sectors performance was supported by operational efficiency and stable credit profiles. Credit costs remained low at below 0.5% , aided by the highly liquid nature of gold collateral and timely auctions. Although yield pressures had eased compared to previous years, NBFCs lending rates were still 200 to 300 basis points lower than their peak levels in FY2021-22. As a result, profitability depended largely on improving operational leverage and expanding digital lending channels.

Growth prospects are now being reshaped by regulatory changes. In draft guidelines released on April 3, 2025, the Reserve Bank of India proposed a uniform loan-to-value (LTV) cap of 75 percent for all gold loans, irrespective of the loan purpose. Along with stricter norms around bullet repayment structures, these measures are expected to moderate disbursements in the near term. However, the regulations are intended to standardise lending practices, reduce credit risk, and enhance transparency. Supported by low credit costs and rising digital adoption, the NBFC gold loan segment is well positioned for long-term resilience and sustainable growth.

STANDALONE FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Operational Performance

During FY 2024-2025, the total income (before interest expenses and including fee and other income) stood at RS. 4,223 Crore. Net Interest Income ( Total Income (-) Interest expenses) for the year grew by 23% to RS. 2,708 Crore and Net Interest Margin for FY 2024-25 remained at 9.58%.

Operating expenses increased to ^ 1,291 Crore for FY 2024-25 from ^ 807 Crore in FY 2023-24 on account of one time opex of ^ 71 Crore and strategic investments in technology, infrastructure, distribution & talent in existing and new products, aimed at building future ready infrastructure and sustainable profitability. The Cost to Net Income Ratio remained at 47.7% for FY 2024-25. Pre-provision operating profit grew by 2% to RS. 1417 Crore as compared to RS. 1389 Crore in FY 2023-24. Provisions for the year FY 2024-25 remained at RS. 1553 Crore as compared to RS. 72 Crore in FY 2023-24.

Profit after Tax (excluding exceptional items) for FY 2024-25 is H (98) Crore as compared to RS. 1,027 Crore for FY 2023-24 and Profit after Tax (including exceptional items) is H (98) Crore as compared to RS. 2,056 Crore for FY 2023-24. The Return on Assets (%) excluding exceptional items for FY 2024-25 is (0.35%) as compared to 5.24% in FY 2023-24.

Loan Assets

The loan assets grew by 42.5% YoY to RS. 35,631 Crore as on March . 31, 2025, from RS. 25,003 Crore as on March . 31, 2024. The loan assets are well diversified with MSME Lending constituting 36%, personal and consumer loans constituting 23%, loan against property and pre-owned car finance constituting 24% and 14% respectively.

On-book secured unsecured mix as on March . 31,2025 is 57:43 compared to 49:51 as on March . 31, 2024.

Asset quality

The Gross Stage 3 Assets ratio as on March . 31, 2025 is 1.84%, as compared to 1.16% as on March . 31, 2024. Similarly, the Net Stage 3 Assets ratio is 0.85% as on March . 31, 2025, as compared to 0.59% as on March . 31, 2024.

Liquidity

We maintained a strong liquidity position throughout the year. Liquidity is composed of cash/ cash equivalents, available bank lines and stock of unencumbered liquid investments. We ended the year under review with standalone liquidity of around RS. 4,686 Crore comprising available cash and cash equivalent, unutilised credit limits and partially undrawn term loans.

During the year, the Company has raised fresh term loans of ^6,450 Crore and external commercial borrowings of ^1,477 Crore from banks and other financial institutions for a door-to-door tenor ranging from 2 to 5.5 years. Besides public sector banks/financial institutions, incremental credit lines were received from private banks to diversify the borrowing base. The Company also raised commercial paper (CP) aggregating to RS. 17,115 Crore (peak outstanding of CP during the year was RS. 5,350 Crore) and RS. 960 Crore of secured non-convertible debentures during the year through private placement basis.

By way of contingency funding, the Company maintained a stock of highly liquid investments, undrawn bank lines and a buffer of unencumbered assets. This was overlaid by continuous discussions with market participants and bankers for enhancements and fresh facilities thereby maintaining robust funding pipelines. Pool sales through assignments and securitisation can be other options of raising funds.

During the year under review, the long-term ratings assigned to various debt instruments and bank facilities of the Company were reaffirmed by CARE Rating and CRISIL to ‘CARE AAA; Stable and ‘Crisil AAA/Stable respectively on strong parentage, low leverage, comfortable asset quality, focused and diversified product approach in retail segment and a strong senior management team.

Financial highlights

(Rs. in Crore)
Particulars	FY 2025	FY 2024
Total Income	4,222.84	3,151.82
Finance cost	1,515.09	955.10
Net income	2,707.75	2,196.72
Operating expenses	1,290.57	807.36
Pre-provisioning operating profit	1,417.18	1,389.36
Net loss on derecognition of financial instruments	94.41	-
Impairment on financial instruments	1,458.17	72.02
Profit/(loss) before exceptional item and tax	(135.40)	1,317.34
Exceptional items	-	1,221.20
Profit/(loss) before tax	(135.40)	2,538.54
Profit/(loss) after tax	(98.34)	2,055.96
Other comprehensive income	(14.08)	0.83
Total comprehensive income	(112.42)	2,056.79
Details of key financial ratios on standalone basis
Ratios	FY2025	FY2024
Operating expenses to Net Income	47.7%	36.8%
Return on average assets (ROA)*	(0.3%)	5.2%
Return on average equity (ROE)*	(1.2%)	13.4%
Capital to risk-weightage asset ratio (CRAR)	22.94%	33.80%
of which, Tier I	21.67%	32.28%
of which, Tier II	1.27%	1.52%
*Excluding Exceptional Items
Ratios	FY2025	FY2024
Gross NPA	1.84%	1.16%
Net NPA	0.85%	0.59%
Debt equity ratio	3.19	1.86
Provisioning coverage ratio (PCR)	54.47%	49.39%
EPS - Basic (H)	(1.27)	26.75
Diluted (H)	(1.27)	26.43
EPS- Basic (H)*	(1.27)	13.37
Diluted (H)*	(1.27)	13.21

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

At standalone level, Return on Assets (ROA) excluding exceptional items decreased from 5.24% in FY 202324 to (0.35%) in FY 2024-25 and Return on Equity (ROE) excluding exceptional items decreased from 13.4% in FY 2023-24 to (1.2%) in FY 2024-25 on account of one-time accelerated provisioning of RS. 666 Crore on the erstwhile small ticket personal loan book along with continued investments in existing & new business lines and one time opex of RS. 71 Crore.

BUSINESS REVIEW

At Poonawalla Fincorp Limited, we continued to drive our strategy of building a sustainable, technology- led, and customer-focused financial institution throughout FY 2024-25. Backed by disciplined execution, product innovation, and prudent risk management, we further strengthened our presence in the Consumer and MSME lending ecosystems, while enhancing operational agility and resilience.

Over the past year, we have made significant investments in launching multiple scalable lending platforms across secured, unsecured, and digital segments. These businesses are being built methodically—person-by-person,process-by process—underpinned by robust risk management frameworks and technology-driven delivery systems. Our focus remained on targeted markets, prioritising key revenue and profit pools.

We have laid out five building blocks to drive our growth. The First building block is our people. Our senior leadership has been on boarded, completing the leadership foundation of organisation with the right management depth. Further, our businesses team is moving at great momentum. Across organization, we are bringing in scalability and consistency in our people practices.

Our second building block is our products and distribution. We have laid out our vision to become a multi-product lender that serves the aspiration of Bharat holistically, expanding from a product portfolio of existing four products to around 10 and phase- wise launch of 400 new branches by FY 2025 -26. We launched Prime Personal Loan and now ramped up to the levels of approximately RS. 200 crores of monthly run rate. This business will augment our presence in the middle-income segment across the country and complement our play in the consumer durables and education loans. Further, we have identified opportunities in Education Loans, Commercial

Vehicles Loans, Consumer Durable Loans, Shopkeeper Loans, and Gold Loan.

The third pillar of our transformation strategy is to embed AI and analytics deeply into our operating model. With a clear AI roadmap and collaborative efforts with leading institution, we are deploying targeted use cases across credit, risk, collections, digital marketing, compliance, audit, HR, customer service, IT, analytics, admin, infrastructure, and operation. From AI-led underwriting to GenAI- driven hiring and customer engagement tools, these innovations are enhancing efficiency, risk management, and user experience.

Simultaneously, our technology strategy, our fourth pillar, focuses on modular, scalable architecture, unified platforms, and omnichannel journeys to support growth. Emphasis on data governance, cybersecurity, and regulatory compliance ensures our AI-led evolution is secure, responsible, and future- ready.

Our fifth pillar—risk management—forms the foundation of PFL 2.0, built around People, Design, and Process. With a strong talent bench, advanced credit algorithms, AI-led decisioning, and automated collections, we are enhancing credit quality, portfolio resilience, and governance. Strategic innovation and data-driven frameworks drive scalable, efficient, and secure lending growth.

SEGMENT-WISE BUSINESS PERFORMANCE MSME Loans

Our MSME portfolio—which includes Business Loans, Loans to Professionals, and Supply Chain Finance & other products—continued to gain traction across geographies and sectors. AUM rose by 40% to RS. 12,942 Crore as on March . 31, 2025, from RS. 9,260 Crore in the previous year. This segment accounted for 36% of the loan assets, compared to 37% in FY 2023-24.

Personal and Consumer Loans

The Personal and Consumer Loans segment which includes Prime Personal Loans and Small Ticket Personal Loans remained a key growth driver. AUM rose by 38% to RS.8,098 Crore as on March . 31, 2025, compared to RS.5,855 Crore as on March . 31, 2024. This segment contributed 23% of the total loan book in line with FY2023-24.

Loan Against Property (LAP)

The LAP segment demonstrated strong performance backed by digital underwriting and efficient risk frameworks. AUM increased by 108% to RS. 8,466 Crore as on March . 31, 2025, compared to RS. 4,072 Crore as on March . 31, 2024. This business constituted 24% of the total loan assets as of March . 31, 2025, an improvement from 16% in the previous year.

Pre-owned Car Finance (POC)

Within the secured lending portfolio, our PreOwned Car (POC) finance business delivered strong momentum during the year. AUM increased by 34% to RS. 4,883 Crore as on March . 31, 2025, from RS. 3,647 Crore a year earlier. The growth was led by expanding customer segments and improved distribution reach. This segment accounted for 14% of the loan assets, as compared to 15% in FY 2023-24.

Key Focus Areas for FY 25-26

• Retail-Led, Digital-First Lending Expansion

Drive growth in prime and super-prime retail segments through fully digital, paperless journeys across personal, professional, and MSME loans. Deepen customer reach through a robust phygital model, spanning app, web, branches, DSAs, and call centres.

• Product Diversification and Lifecycle Monetisation

Scale high-yield, customer-centric products including PL Prime, Gold Loans, Shopkeeper Loans, Consumer Durables, CVs, and Education Loans. Strengthen lifetime value through targeted crosssell and segment-specific strategies across urban and semi-urban markets.

• Profitability through Cost Optimisation and Yield Focus

Improve ROA and ROE by prioritising secured, high-yield products, while controlling costs through tech-enabled automation, lean processes, and centralised operations. Sustain opex-to-AUM and cost-to-income ratios despite scaling.

• AI-First Operating Model

Embed Artificial Intelligence and Machine Learning across credit, collections, HR, compliance, and customer service. Leverage predictive decisioning, intelligent automation, and Large language models to enhance accuracy, responsiveness, and efficiency at scale.

• Strengthening Risk Management and Governance Framework

Reinforce robust credit and operational risk frameworks using Al-driven scorecards, early warning systems, stress testing, and risk-adjusted pricing. Maintain industry-best asset quality and provisioning standards even while scaling new portfolios.

• Collections Reinvention for Scale and Sustainability

Modernise collections through persona-based strategies, AI-assisted allocation, multilingual bots, and real-time tracking. Optimise capacity planning, improve recovery efficiency, and ensure asset quality during rapid AUM expansion.

• Liability Diversification and Liquidity Management

Optimise the cost and mix of borrowings through a broad base of lenders/investors including banks, financial institutions, mutual funds, insurance companies and corporate treasuries and increasing focus on NCDs and external commercial borrowings. Maintain a strong AAA credit rating, positive ALM profile, and liquidity buffer to support future growth.

• Building Institutional Strength and Execution Agility

Invest in internal capability building through Ailed HR systems, zero-click experience, talent development, and governance-first culture. Strengthen execution agility to support the companys ambition of 5-6x AUM over the next five years from FY24

SWOT ANALYSIS Strengths

Strong Brand Equity and Experienced Leadership

As a part of the Cyrus Poonawalla Group, the Company benefits from a strong legacy and brand trust. The leadership team brings deep expertise and a clear strategic focus on technology-led growth, asset quality, and operational excellence. In FY 2024-25, the Company continued to steer its roadmap effectively amidst macro uncertainties, with a focus on risk-calibrated expansion and customercentric innovation.

Prudent Capital and Risk Management

The Company sustained a disciplined risk and capital management approach, ensuring resilience across cycles. As of March . 31, 2025, Poonawalla Fincorp reported a healthy Capital to Risk (Weighted) Assets Ratio (CRAR) of 22.94%, well above regulatory requirements. Gross NPA stood at 1.84%, and Net NPA at 0.85%, among the lowest in the industry.

Provision Coverage Ratio (PCR) remained strong at 54.47%, supported by one-time provisioning in specific portfolios. The Company maintained top-tier credit ratings—CARE AAA; Stable andCRISIL AAA/ Stable—reaffirming its robust financial profile and market credibility.

Digital Innovation, Technology Integration and Governance first approach

In FY 2024-25, Poonawalla Fincorp significantly deepened its digital-first operating model. Loan sourcing was conducted through digital channels, while customer service interactions were managed via WhatsApp, reflecting the Companys commitment to seamless experiences. A robust backend architecture now supports end-to-end digital journeys with high throughput and minimal human intervention, contributing to reduced Turn-Around Times (TAT), improved user experience, and higher customer satisfaction. Multiple AI-led initiatives were launched across functions to further improve precision, efficiency, and reliability.

Phygital, Cost-Efficient Distribution Model

The Companys phygital model blends digital scale with physical outreach. Strategic integrations with fintechs, aggregators & digital ecosystem helped expand reach and maintain acquisition cost efficiencies. This architecture supported the launch and ramp-up of multiple new products.

Weaknesses

Need for Real-Time Product Feedback and Iteration Cycles

Reflecting on previous years experiences, it becomes apparent that the scope for enhancing our focus on the continuous monitoring and performance evaluation of new offerings is significant. As the product portfolio expands, faster iteration cycles and agile product innovation frameworks will be crucial for sustaining product-market fit and deepening customer engagement.

Opportunities

Expanding Digital Credit Penetration in Tier 2+ Markets

Indias continued digitisation, particularly in Tier 2 to Tier 4 markets, presents significant growth potential. Increasing smartphone penetration, improved digital literacy, and rising credit aspirations among underserved populations enable the Company to tap into a vast, underpenetrated borrower base with tailored, digital-first products.

Deepening Presence in High-Growth Retail and MSME Lending Segments

The Companys product suite—comprising of Existing products i.e. Personal Loans, Professional Loans, Business Loans, Loans Against Property (LAP), and Pre-Owned Car Finance & New Products i.e. Prime Personal Loans, Education Loan, Commercial Vehicle, Consumer Durable, Shopkeeper Loans & Gold Loans —is well-aligned with evolving consumer and small business credit demand. FY 2024-25 saw strong traction in existing products, with significant headroom remaining for further market share gains.

Strategic Partnerships and Embedded Finance

Strategic Partnerships with fintechs, aggregators and digital ecosystems offer new distribution levers through embedded finance models. API integrations and white-labelled offerings can unlock new customer segments while keeping cost of acquisition low, particularly in consumer-facing and unsecured lending categories.

Threats

Intensifying Competitive Landscape

The rise of agile fintech lenders and digital NBFCs has intensified competition across unsecured lending categories. Their ability to offer rapid decisioning, personalised journeys, and aggressive pricing poses risks to customer retention and margin stability.

Geopolitical and Economic Uncertainty

Geopolitical tensions, currency volatility, and global inflationary trends may affect domestic economic sentiment and investor confidence. These externalities could influence credit off-take, increase risk provisioning, and warrant cautious balance sheet management.

RISK MANAGEMENT

Our company has established a robust Integrated Risk Management (IRM) policy, endorsed by the Board and subject to regular review, to oversee and manage the spectrum of risks inherent in our operations. This framework encompasses a wide range of risk categories, including but not limited to Credit Risk, Operational Risk, Market Risk, Liquidity Risk, Compliance Risk, Reputational Risk, Financial Risk, and People Risk. Central to our approach is the identification, measurement, mitigation and reporting of risks, supported by continuous monitoring of Key Risk Indicators (KRIs) to ensure organisational objectives are met across all business units.

The implementation of our IRM framework is spearheaded by our Senior Management team, reflecting our commitment to embedding risk management practices deeply within our corporate ethos. Our risk management strategy is built upon five foundational principles:

1. Objectively constructed Risk Appetite Statement covering all key aspects of a lending business;

2. Independent governance and risk management oversight;

3. Establishment of forward-looking strategic risk assessment with pre-emptive credit and liquidity interventions, to ensure proactive early action in the event of emerging market adversity;

4. Maintenance of well-documented risk policies with performance guardrails; and

5. Extensive use of risk and business analytics, and credit bureau as an integral part of decision-making process.

The leadership of our Risk Management Department is entrusted to the Chief Risk Officer (CRO), who plays a pivotal role in guiding the organisations risk management policies and practices. The CRO is charged with the oversight of all risk dimensions—including credit, operational, market, liquidity, reputational, compliance, financial and people risks across all businesses, products, and processes. This structure ensures a cohesive and integrated approach to risk management, safeguarding our companys integrity and financial health.

The risk governance framework is depicted in the chart below.

CREDIT RISK

Our institution has established a sophisticated approach to managing credit risk, ensuring that every loan sanction and booking is governed by an independent approval process. This process is guided by nuanced product policies, stringent customer selection criteria, precise credit acceptance standards, and a thorough credit underwriting framework. Through this approach, we are able to conduct a comprehensive assessment of each customer, taking into account both financial and non-financial metrics to ensure a balanced evaluation.

Management of the Risk

Credit Policy Framework

All credit policies within our organisation are documented and receive formal approval from the Risk Management Committee of the Board. To remain responsive to evolving macro-economic conditions, industry trends, segment-specific dynamics, and insights from credit bureau data, alongside our own internal portfolio performance, these policies are subject to regular review and updates.

Credit Risk Management Policy

We have developed a detailed Credit Risk Management Policy that articulates the various facets of credit risk and outlines our management framework. The policy encompasses exposure norms, identifies sensitive sectors, sets portfolio guardrails, and details regulatory restrictions on loans and advances, among other critical parameters.

Credit Approval and Administration

Our credit approval and administrative processes leverage a Credit Rule Engine, combined with the expertise of seasoned credit appraisal professionals, and an effective delegation of credit authority. This approach ensures judicious management of credit approvals.

Portfolio Quality Monitoring

The enhancement of portfolio quality is an ongoing endeavour. We employ continuous monitoring of our loan portfolio using a variety of indicators to promptly identify any early warning signs of stress. This approach allows us to maintain the superior quality of our portfolio credit. Additionally, we engage in hind-sighting exercises to identify and implement necessary interventions in our Credit Policy. Such measures are aimed at further enhancing portfolio quality and minimising potential losses, ensuring our institutions resilience and financial stability.

OPERATIONAL RISK

In FY2025, our Operational Risk (OR) team played a crucial role in identifying, assessing, monitoring, and mitigating risks throughout the organisation. Through Risk and Control Self-Assessment (RCSA) exercises, Internal Finance Control (IFC) testing, KRI monitoring, and the implementation of action plans to address process gaps, we have strengthened our operational risk management.

The OR team supports senior management in risk oversight by providing quarterly operational risk updates to the Operational Risk Management Committee (ORMC) and the Risk Management Committee (RMC).

Management of the Risk

Operational Risk Management Policy

We have instituted a well-documented Operational Risk Management Policy that serves as the encapsulation of our approach, providing clear guidelines and procedures for identifying, assessing, and mitigating operational risks.

Governance Structure

A robust governance structure guides our Operational Risk Management efforts, defining roles, responsibilities, and accountability across the organisation to ensure effective oversight and implementation of risk mitigation strategies.

Identification and Monitoring Tools

Our use of sophisticated identification and monitoring tools, including Risk and Control Self-Assessment (RCSA) and Key Risk Indicators (KRIs), facilitates ongoing vigilance and proactive management of potential risks.

Reporting and Communication

Standardised reporting templates and a structured reporting frequency ensure consistent communication of Operational Risk information. This framework supports transparency and facilitates informed decision-making at all levels of the organization.

Culture of Risk Awareness

Through regular workshops and training sessions, we foster a culture of risk awareness and encourage a proactive stance towards risk management among our employees, enhancing our overall risk culture.

Three Lines of Defence Approach

1. First Line of Defence: At the operational level, functions and verticals engage in transaction testing to evaluate compliance internally, initiating "bottom-up" process improvements. This approach fosters ownership and swift implementation of corrective actions to mitigate identified risks.

2. Second Line of Defence: An independent risk management vertical collaborates with the first line to develop risk mitigation strategies and maintain oversight through continuous monitoring. Key risks are systematically reviewed by the Risk Management Committee on a quarterly basis.

3. Third Line of Defence: Our Internal Audit team conducts periodic risk-based audits across all functions and processes, offering an independent evaluation and assurance to the Audit Committee regarding the effectiveness of risk management practices.

FRAUD RISK MANAGEMENT

Fraud can undermine the effective functioning and divert scarce and valuable resources of the organisation. Moreover, fraudulent and corrupt behaviour can seriously damage reputation and diminish trust to deliver results in an accountable and transparent manner. To combat fraud, our organisation has an effective governance framework for preventing, identifying, reporting and effectively dealing with fraud and other forms of corruption. We are consistently putting efforts to prevent, detect and contain frauds. We have a dedicated Fraud Risk Management Unit (FRMU) to monitor, investigate, detect and prevent frauds. The unit has been further strengthened during FY25. We are committed to preventing, identifying and addressing all acts of fraud against our organisation, whether committed by the staff members or other personnel or by third parties. We have zero tolerance for fraud. To this effect, we are committed to raising awareness of fraud risks, implementing controls aimed at preventing fraud, and establishing and maintaining procedures applicable to the detection of fraud. As a second line of defence Fraud Risk Management, monitors & checks compliance and reports all fraud risks in the institution on an ongoing basis. The FRMU reports to the Chief Risk Officer. All frauds as specified by the regulator are being monitored by the Committee of Executives [COE] (formed as per Master Directions on Frauds) and further updated to Audit Committee and Board of Directors.

The roles and responsibility of Fraud Risk Management Unit are highlighted below:

Component	Principal
Control Environment	• Fraud Risk Management Policy is developed and reviewed periodically.
	• All processes are being reviewed through ORM and Fraud risk to mitigate unforeseen gaps.
	• Cross functional training
Risk Assessment	• Comprehensive fraud risk assessments are done in support of ORM.
	• Processes are being reviewed to plug the gaps.
	• Learning through investigations is shared to mitigate the open risks for more effective policy & processes.
Information & communication	• We have established a communication process to obtain information about potential fraud through whistle blower policy and has deployed a coordinate approach to investigation and corrective action to address fraud appropriately and in a timely manner.
Monitoring	• All frauds are reported to the regulator and are reviewed by the COE & updated to Audit Committee as well as Board of Directors.

MARKET RISK

Market risk has the potential to adversely impact our financial positions due to fluctuations in market prices - including changes in interest rates, foreign exchange rates, and equity and commodity prices. To safeguard the organisation against these uncertainties, we adhere to a Market Risk Management Policy that has been approved by our Board.

Management of the Risk

To manage the liquidity of our portfolio effectively while minimising market risk, we focus our investments on fixed income securities. This strategy is primarily aimed at liquidity management, with a keen awareness of the key risks inherent to fixed income investments, namely interest rate risk and default risk. Our investment approach is carefully calibrated to prioritise securities that present negligible to low default risk. Additionally, we employ strategic duration targeting to mitigate the impact of interest rate fluctuations, ensuring that our investment practices are aligned with our risk appetite and overall financial health objectives.

FOREIGN EXCHANGE RISK

Any foreign currency exposure undertaken by the Company is adequately hedged as a measure of robust risk management.

LIQUIDITY RISK

Liquidity risk arises from mismatches in the maturities of our borrowed and disbursed funds, potentially affecting our ability to fulfil obligations and achieve business goals. It is crucial to ensure minimal disparity between the tenure of borrowed funds and the assets they finance. Our efforts are geared towards maintaining an optimal asset-liability match in terms of both tenure and interest rates, thereby safeguarding our financial stability and operational fluidity.

Management of the Risk

Our approach to managing liquidity risk is guided by rigorous fund management practices and a focused effort on diversifying our borrowing portfolio. This diversification strategy enhances the resilience of our funding sources and expands our lender base across various segments, including Public & Private Sector Banks, Insurance Companies, Mutual Funds, Pension Funds, Financial Institutions, Corporates, and Foreign Portfolio Investors.

In pursuit of liquidity risk mitigation, our Company has cultivated a diversified liquidity mix, characterised by a level of unutilised bank limits, partially drawn bank lines, and on-balance-sheet liquidity reserves such as Fixed Deposits, liquid funds, and overnight funds. These measures collectively contribute to our capability to manage liquidity risk at an optimal level efficiently.

Central to our liquidity risk management framework is the Asset Liability Management Committee (ALCO). The ALCO convenes periodically to review our asset- liability position, borrowing costs, fund costs, and the sensitivity of projected cash flows, including conducting Stress Testing across short and longterm horizons. Based on its assessments, the ALCO proposes corrective actions to address any identified gaps. Additionally, the ALCO remains attuned to changes in the economic landscape and financial markets, formulating recommendations for effective resource allocation. This forward-looking approach ensures continuous alignment with our financial risk management objectives, encompassing asset-liability, foreign currency, and liquidity risk management. Being a "AAA" rated company further enhances our ability to raise funds at competitive rates.

PEOPLE RISK

Recognising that our workforce is our most invaluable asset, we prioritise fostering a work environment conducive to both the professional growth and wellbeing of our employees. Our organisational policies are designed to ensure a workplace that is healthy

and safe while being inclusive and free from any form of discrimination or harassment. This commitment to our employees enables us to attract, engage, and retain top talent, thereby creating enduring value for our customers and stakeholders alike.

Management of the Risk

Skilled Manpower Availability

We actively address the challenge of sourcing candidates who possess the requisite skill set and experience while aligning with our organisational culture. This involves leveraging innovative recruitment strategies and developing partnerships with educational institutions to tap into a broader talent pool.

Productivity Risk

To mitigate productivity risks associated with longer learning curves and the time-intensive nature of hiring or replacing personnel, we have instituted comprehensive onboarding and training programmes. These initiatives are designed to accelerate proficiency and ensure that new hires contribute effectively in a shorter timeframe.

Succession Planning

Understanding the importance of leadership continuity for business sustainability, we have developed a structured approach to succession planning. This strategy includes identifying potential leadership gaps and nurturing a pipeline of internal candidates equipped to assume these roles when the need arises.

CYBERSECURITY RISK

We recognise cybersecurity risk as a critical concern - reflecting the potential for unauthorised data access by unethical hackers. This could lead to financial, reputational, and legal repercussions. The advent of sophisticated threats like zero day, viruses ransomware and spyware such as Pegasus shows the evolving complexity of cybersecurity challenges. To safeguard against these vulnerabilities, our Company has instituted a robust risk management framework centred on employee awareness and preventive training.

Management of the Risk

Employee Awareness and Training

Our cybersecurity strategy is rooted in comprehensive training aimed at educating employees about digital safety practices. The training programmes cover safe digital behaviours, awareness of phishing and vishing scams, and the importance of avoiding downloads from unverified sources. Simulated phishing exercises are conducted to test and reinforce these practices among the staff.

Executive Training

Specialised training sessions are held for CXOs and senior management, focusing on high-level fraud risks and artificial intelligence tools for security enhancement. These targeted sessions equip the Companys leaders with the knowledge to navigate the cyber threat landscape effectively.

Internal Capital Adequacy Assessment Process (ICAAP)

We have adopted the ICAAP framework as enunciated in the Scale Based Regulation framework. As part of the risk assessment under ICAAP framework, we have quantified capital requirement for all material risks that our Company is exposed to and stress scenarios pertaining to these risks. The recent ICAAP exercise indicates that our company has sufficient capital cushion available to meet its capital requirements after factoring in material risks as well as stress testing scenarios.

Internal Control System

The Management has laid down a set of standards, processes and structure which enables it to implement internal financial controls across the organization with reference to financial statements and such controls are adequate and are operating effectively. Internal Finance control framework has been established in line with Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (the ‘Guidance Note).

During FY 2024-25, testing was conducted basis process walkthrough and review of samples as per documented controls in the Risk and Control matrix. Testing was done for each of the controls confirming the existence and operating effectiveness of controls over financial reporting. Review was performed on design, adequacy and operating effectiveness of the controls.

The internal financial control is supplemented by extensive internal audits, regular reviews by the Management and standard policies and guidelines to ensure reliability of financial and all other records to prepare financial statements, its reporting and other data. The Audit Committee of the Board reviews internal audit reports given along with management responses. The Audit Committee also monitors the implemented suggestions. The Company has, in all material respects, adequate internal financial control over financial reporting and such controls are operating effectively.

The Joint Statutory Auditors of the Company have also certified the existence and operating effectiveness of the internal financial controls relating to financial reporting as of March . 31, 2025. During the year under review, no material or serious observation has been observed for inefficiency or inadequacy of such controls.

Commitment to Continuous Improvement

Poonawalla Fincorp remains committed to continuously strengthening its internal control systems in line with evolving regulatory requirements and global best practices. By aligning our controls with our digital transformation journey, we aim to enhance governance, operational excellence, and stakeholder confidence.

HUMAN RESOURCE

Human Resource - People Count at Every Step

Human Resources (HR) departments play a crucial role in driving organizational success. The transformational journey of HR within an organization involves implementing best practices to ensure the development and growth of both the employees and the company. Below are some of the key aspects of HR transformational Journey that contribute to PFLs Success.

In the FY 2024-25, the Human Resources department prioritized innovation and efficiency through strategic automation and the integration of Artificial Intelligence (AI) into core HR functions. This forwardlooking approach was designed to enhance decisionmaking and improve employee experience across the organization. This transformational journey of HR within an organization is setting industrial benchmarks. Below are some of the key aspects of HR transformational Journey that contribute to PFLs Success.

Aligning HR Strategy with Organization Goals

One of the fundamental steps to enable the transformational journey of PFL was to align the people strategy to the organization goal and vision 2026. It was imperative for the Human Resources team to understand the organizational objectives and challenges, thereby designing appropriate strategies that would accelerate the organizational goal.

Following are a few of the strategic interventions that we undertook to enable the growth journey while staying aligned to our value framework - CREDIT.

Cultivating a Culture of Transparency:

In alignment with our HR vision of enabling a "Zero Clicks" experience and streamlining HR interactions, the year witnessed a series of high- impact interventions designed to drive employee engagement, productivity, and wellbeing. Anchored in a culture of agility and smart, AI-enabled processes, our initiatives reflect a "Customer-First, AI-First" mindset aimed at shaping a future-ready workforce.

One of the standout initiatives was the launch of the MDs Honour Framework, a prestigious recognition platform under the aegis of the MD & CEOs desk, designed to celebrate exemplary contributions and reinforce a culture of high performance and innovation. To enhance hiring outcomes and capability development, we strengthened collaboration between Talent Acquisition, Learning & Development, and Hiring Managers, ensuring hiring sources were aligned with learning needs and future capability planning. In a decisive step toward talent retention, especially in tech functions, we standardized a five- day workweek for IT teams, aligning with industry best practices and making the organization more attractive to high-caliber talent.

Furthering our commitment to responsible innovation, a Committee of Executives was formed to oversee the Governance of AI adoption, ensuring ethical use and mitigating risks.

To strengthen transparency and employee connect, we launched a dedicated HR WhatsApp handle, enabling real-time communication and faster dissemination of key updates and initiatives. Reinforcing our commitment to fairness and employee voice, also rolled out a refreshed Employee Grievance Redressal Guidelines focused on consistency, empathy, and transparency. Our leadership doubled down on openness and accountability by promoting value- based people practices and championing a culture of trust.

To ensure that our organizational structure and compensation practices are aligned with industry standards and best practices, we have undertaken a comprehensive Job Evaluation, Job Sizing, and Job Benchmarking exercise. This initiative is a critical component of our commitment to maintaining a fair, transparent, and competitive workplace. This exercise underscores our dedication to creating a workplace where employees feel valued and compensated.

Productivity & Performance culture:

To ensure clarity and alignment across teams, department-level Scorecards were introduced, objectively measuring performance through quantifiable, transparent and verifiable metrics linked to both outcomes and process adherence. Further, objectivity in Mid-Year Grade Progression was reinforced through calibrated guidelines and structured evaluation frameworks, promoting fairness and consistency in Career Progression.

Collectively, these interventions have elevated the employee experience, improved decision-making at all levels, and built a robust, tech-enabled HR ecosystem that supports development, enhances the candidate journey, and strengthens lifecycle management. The result is a more agile, engaged, and empowered workforce that is well-prepared for the future.

On the work-life front, introduced flexible work hours and enhanced our Work from Home (WFH) guidelines to improve employee wellbeing, productivity, and engagement. These initiatives were complemented by structured flexibility norms, fostering a high- performance, inclusive work environment. Additionally, launched Wellness Leave (Annual Health checkup leave), allowing employees to take proactive step towards their overall well-being by undergoing a comprehensive medical checkup.

To further support our employees health and wellness, Medical Insurance has been enhanced to focus on Womens Health. This additional benefit covers various aspects, including Cervical Cancer vaccination. A WhatsApp helpline was established to provide quick and convenient assistance for any insurance-related queries or concerns. Moreover, to promote a healthy lifestyle, "Fun-with-Fitness" sessions were organized at multiple locations, encouraging employees to participate in physical activities and maintain their fitness levels.

Regular MDs townhalls were institutionalized as a platform for transparent communication, strategic alignment, and two-way engagement between leadership and employees.

Fostering a Culture of Continuous Learning & Strengthening Leadership:

Continuous reskilling and upskilling were essential to enable our employees to deliver the desired organizational goals.

Training Need Analysis: In our ongoing commitment to fostering a culture of continuous learning and strengthening leadership, we conducted comprehensive training need analysis across the company. This analysis led to the implementation of several key initiatives that have significantly contributed to our organizational growth and employee development.

Induction Program - Prarambh:

One of our major initiatives was the introduction of a holistic 5-day induction program, Prarambh. This program covers essential areas such as policy, product, systems, and skills, and is complemented by a robust and scientific onboarding process. As a result of these efforts, we have successfully reduced attrition by bringing it down from 14% to 6.5%.

Functional Trainers Network: we established a network of 190 functional trainers within the company. Additionally, we launched SkillUp, a digital learning experience platform, which has achieved industry-best adoption and consumption rates of 91% and 82.4%, respectively. This platform has been instrumental in providing our employees with the necessary tools and resources to enhance their skills and knowledge.

Leadership Development Journeys: Developed

6-month leadership journeys for existing and firsttime managers. Focused on tracking behavior, productivity, and attrition parameters.

Career Development & Planning (CDCP): Launched the CDCP initiative, resulting in 27% of employees covered were made & certified to be role ready in less than 6 months. Furthermore, Implemented the Young Leaders Development Plan for individual contributors, preparing them for future leadership roles, witRs. 30% participants successfully completing the journey.

To ensure leadership continuity, organizational resilience and tailored development plans of our existing talents, we launched our Succession Planning framework. This proactive approach ensures that we are well-prepared for future transitions and that our employees are equipped with the skills and knowledge necessary to step into new roles seamlessly.

Talent Identification and Retention: To identify the right talent and prevent early attrition, we conducted interview workshops and assessments for our leaders. These efforts have been pivotal in ensuring that we hire and retain the best talent for our organization.

These initiatives have significantly strengthened our culture of continuous learning and leadership excellence, aligning employee growth with organizational goals and objectives.

Leveraging Technology for HR Innovation & Analytics:

Our AI initiatives have made significant strides across various departments, driving efficiency and innovation.

In HR, the Candidate Employability project has revolutionized our hiring process by leveraging AI for resume parsing, job matching, survivability analysis, and autonomous actions, reducing processing time by over 90% and increasing offer capacity tenfold. We also scaled up our people and partner networks. Hiring velocity grew sharply monthly offers increased from 125 in RS.1 to over 1,000 by January 2025, using AI and Robotic Process Automation (RPA).

Future phases aim to predict candidate success with zero human intervention, ensuring scalable processes. Additionally, the Employee Conversational Agent- PAI@HR, integrated with MS-Teams, provides real-time query resolution, significantly saving time in HR operations. The conversational agent leverages advanced AI technology to provide instant, accurate responses to a wide range of HR-related queries.

Furthermore, we have partnered with IIT Powai to leverage AI and ML tools to predict a candidates longevity and performance at PFL, based on our historical, candidate, and employee data. Collectively, these AI projects streamline processes, enhance decision-making, and significantly reduce manual efforts across departments, driving overall organizational efficiency and effectiveness.

In the Admin department, the Agreement Verification project employs AI to meticulously check drafts and hard copies, reducing manual verification time from 2 hours to mere minutes, achieving a 95%- time reduction with zero errors. Our Compliance projects focus on scanning and updating regulatory requirements, recommending policy modifications, and ensuring real-time compliance, leading to automated and robust compliance testing.

In the Audit department, in collaboration with ServiceNow, enhances our audit capabilities using Generative AI, improving accuracy, reliability, and governance. For Risk & Credit, our AI solution integrates LLM and ML for credit decisioning, boosting credit managers productivity by 40% and accelerating accurate credit decisions. The Collections project implements an AI-powered debt management platform, enhancing efficiency, reducing 4-5 days of manual effort, and providing 2-3 times sharper risk assessment.

Number of employees employed as on March . 31, 2025 stood at 3,594.

CAUTIONARY STATEMENT

This Management Discussion and Analysis contains certain forward-looking statements relating to the Companys future business prospects, strategies, objectives, plans, outlook, and expectations, which are based on current assumptions, forecasts, and estimates. These statements may be identified by words such as "expects", "intends", "aims", "anticipates", "believes", "plans", "projects", "will", "shall", "may", "would", "could", or similar expressions.

Such forward-looking statements are subject to known and unknown risks, uncertainties, and other factors beyond the Companys control that could cause actual results, performance, or achievements to materially differ from those expressed or implied in such statements. These risks and uncertainties include, but are not limited to, changes in regulatory and policy frameworks, economic conditions (domestic and global), fluctuations in interest rates, demand-supply dynamics, taxation policies, changes in consumer behavior, market volatility, technology disruptions, and force majeure events including natural calamities.

The Company does not undertake to publicly revise or update any forward-looking statements considering future events or new information, unless so required under applicable laws.

For and on behalf of the Board
Arvind Kapil	Sunil Samdani
Managing Director and	Executive Director
Chief Executive Officer	DIN: 10301175
DIN: 10429289
Place: Mumbai	Place: Mumbai
Date: April 25, 2025	Date: April 25, 2025