Arco Leasing Ltd Management Discussions

COMPANY OVERVIEW & ECONOMY ANALYSIS Indian Economy Growth Outlook:

Indias economy remained resilient during FY 2025 26, supported by strong domestic demand, robust services activity, favourable agricultural performance and improving investment conditions. The Economic Survey 2025 26 highlights that domestic demand continued to remain the principal driver of economic growth. Private Final Consumption Expenditure (PFCE) increased its share to approximately 61.5% of GDP in FY 2025 26, reflecting broad-based consumption supported by low inflation, improving purchasing power, stable employment conditions and strengthening rural demand.

The services sector continued to be the key anchor of the Indian economy, contributing more than half of Gross Value Added and remaining an important driver of domestic growth, exports and employment. Indias services sector has demonstrated considerable resilience, with average annual growth of around 7 8% over the years. Financial, real estate and professional services also continued to make a significant contribution to economic activity.

The investment cycle also remained supportive, with gross fixed capital formation continuing to account for around 30% of GDP. The banking system remained well-capitalised and credit intermediation continued to be healthy. Strong corporate balance sheets, improving capacity utilisation and a relatively comfortable external position provide a favourable foundation for sustained investment and economic expansion.

Indias medium-term economic outlook remains positive, supported by policy continuity, infrastructure development, digitalisation, production-linked incentives, improving domestic demand and opportunities arising from the diversification of global supply chains. The economys relatively strong domestic demand base and resilient services exports provide important buffers against volatility in the global economy.

At the same time, the external environment continues to present challenges. Geopolitical tensions, trade-policy uncertainties, changes in global tariffs, commodity-price volatility and developments in major global economies could affect Indias exports, capital flows and investment sentiment. Nevertheless, Indias strong domestic demand, healthy banking system, adequate foreign exchange reserves and relatively comfortable external position provide resilience against external shocks.

Debt Market and Monetary Environment

FY 2025 26 witnessed continued evolution in Indias debt and monetary markets. The Reserve Bank of India maintained a supportive monetary and liquidity environment, while measures aimed at improving systemic liquidity and transmission supported credit conditions. The easing of monetary conditions, together with moderation in inflationary pressures, provided support to domestic consumption and investment activity.

The governments continued commitment to fiscal consolidation and prudent debt management remained positive from the perspective of the debt market. A relatively stable macroeconomic environment, improving financial-sector balance sheets and adequate liquidity conditions are expected to support the development of Indias debt markets.

Going forward, the debt market outlook will remain influenced by domestic inflation, monetary policy, government borrowing requirements, global interest rates, foreign portfolio flows and geopolitical developments. Indias strong domestic investor base and improving financialisation of household savings are expected to provide structural support to the market.

Non-Banking Financial Companies (NBFCs)

Non-Banking Financial Companies (NBFCs) continue to play a pivotal role in Indias financial ecosystem by providing credit to a wide spectrum of borrowers, including MSMEs, retail customers, micro-entrepreneurs and financially underserved sections of society. The sector remains an important complement to the banking system and contributes significantly to financial inclusion, employment generation and credit availability across urban and rural markets.

During FY 2025 26, the NBFC sector demonstrated resilience, supported by strong capital buffers, improving funding conditions, stable profitability and improving asset quality. Credit demand remained healthy, particularly across retail and secured lending segments. The sector also benefited from increasing digitalisation, greater formalisation of the economy and continued financial inclusion initiatives.

The NBFC sector continued to undergo a process of recalibration, with lenders maintaining a greater focus on underwriting standards, asset quality and sustainable growth. Regulatory measures introduced in recent years have encouraged NBFCs to strengthen risk management practices, capital adequacy, governance standards and customer-protection mechanisms.

The outlook for the NBFC sector remains positive. According to industry estimates, NBFC AUM is expected to grow at approximately 18 19% in FY 2026 27 and is projected to cross 50 lakh crore by March 2027. Retail NBFCs are expected to remain an important growth driver, with the retail segment projected to grow at approximately 16 18% during FY 2026 27.

Growth is expected to be supported by sustained retail consumption, increasing financialisation, digital lending, improving access to formal credit and favourable macroeconomic conditions. Secured lending segments are expected to remain relatively resilient, while lenders are likely to continue adopting a calibrated approach towards unsecured and higher-risk segments.

The sector is also expected to benefit from improved funding conditions and continued technological transformation. Digital underwriting, data analytics, automated credit assessment and wider adoption of digital financial services are expected to improve operational efficiency and expand the reach of formal credit.

However, the NBFC sector will continue to face challenges arising from regulatory changes, asset-quality risks in certain borrower segments, competition from banks and fintech platforms, funding costs, cyber-security risks and global economic uncertainties. Smaller NBFCs may face relatively greater pressure on margins and access to capital, making prudent liquidity and risk management increasingly important.

Overall, the NBFC sector remains well positioned to support Indias economic expansion and financial inclusion objectives. The combination of strong capitalisation, improving asset quality, technological innovation, rising formal credit penetration and sustained demand for retail and MSME credit provides a favourable foundation for continued growth.

Financial Services Sector Outlook

With continued regulatory support, increasing digitalisation and initiatives aimed at promoting financial inclusion and financial literacy, Indias financial services sector remained resilient during FY 2025 26. The sector benefited from the strengthening of banking and financial-sector balance sheets, increasing formalisation of financial activity and greater adoption of digital financial services.

Going forward, the financial services sector is expected to remain an important pillar of Indias economic growth. Increasing household financialisation, expansion of digital payments, wider access to formal credit, growth in insurance and investment products, and continued technological innovation are expected to create significant opportunities for financial-sector participants.

The medium-term outlook for the sector remains favourable, although growth will continue to be shaped by regulatory developments, interest-rate movements, asset-quality trends, cybersecurity considerations and the broader global economic environment.

? The Company generated revenue of Rs. 7.00 Lakhs from its operations during the year under review. Further, the Company earned other income of Rs. 1.17 Lakhs during the year. Accordingly, the total revenue of the Company for the year under review stood at Rs. 8.17 Lakhs, as compared to Rs. 1.14 Lakhs in the previous year. ? Total expenditure of the Company during the financial year 2025-26 is Rs.64.30 Lakhs as compared to Rs.12.65 Lakhs in the previous year. It has resulted in the losses of Rs.56.13 Lakhs to the Company during the financial year of 2025-26.

There were no material changes and commitments affecting the financial position of the Company, between the end of the financial year and the date of this Report.

INDUSTRY:

The NBFC sector remained resilient during FY 2025 26, supported by healthy credit demand, strong capitalisation, improving funding conditions and sustained domestic consumption. The sector continued to witness growth across retail and secured lending segments, while lenders maintained a calibrated approach towards unsecured and higher-risk portfolios. Overall asset quality remained broadly stable, although certain segments continued to warrant close monitoring.

Going forward, the NBFC sector is expected to maintain a healthy growth trajectory, with AUM growth estimated at around 18 19% in FY 2026 27, supported by sustained retail credit demand, favourable macroeconomic conditions and increasing financial inclusion. Growth is expected to be driven by vehicle finance, housing, gold loans and other retail segments. At the same time, prudent underwriting, effective risk management, diversified funding and regulatory compliance will remain key priorities for sustainable growth.

RISK MANAGEMENT AND INTERNAL CONTROL POLICY:

The company has established 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.

Financial Ratio Comparison

Ratio	Formula	FY 2025-26	FY 2024-25
Current Ratio	Current Assets Current Liabilities	0.11 : 1	0.08 : 1
Debt Equity Ratio	Total Debt Shareholders Equity	Not Meaningful	Not Meaningful
Interest Coverage Ratio	EBIT Finance Cost	(24.99) Times	Not Calculable
Operating Profit Margin	Operating Profit Revenue from Operations 100	(787.71%)	Not Calculable
Net Profit Margin	PAT Revenue from Operations 100	(801.86%)	Not Calculable
Inventory Turnover Ratio	COGS Average Inventory	Not Applicable	Not Applicable
Debtor Turnover Ratio	Net Credit Sales Average Trade Receivables	Not Calculable	Not Calculable

OUTLOOK:

Your Company is taking continuous efforts to generate the growth drivers, considering the strategic priorities and keeping a track on information technology developments and compliances thereon.

CAUTIONARY STATEMENT:

Sstatement in the Management Discussion and Analysis, describing our Companys objectives, outlook, opportunities, and expectations may constitute Forward Looking Statements within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied expectations or projections, among others. Several factors make a significant difference to our companys operations including the government regulations, taxation and economic scenario affecting demand and supply, natural calamity and other such factors over which our Company does not have any direct control.

SECRETARIAL AUDIT REPORT FOR THE FINANCIAL YEAR ENDED MARCH 31, 2026

[Pursuant to section 204(1) of the Companies Act, 2013 and Rule No.9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014]

To, The Members,

Arco Leasing Limited (CIN L65910MH1984PLC031957)

Plot No. 123, Street No. 17, MIDC, Marol, Andheri (E), Mumbai 400 093

I have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Arco Leasing Limited (hereinafter referred to as the Company). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing our Opinion thereon.

Based on my verification of the Companys books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of Secretarial Audit, I hereby report that in my opinion, the Company has, during the audit period covering the financial year ended on 31 st March, 2026 complied with the statutory provisions listed hereunder and also that the Company has proper Board - processes and compliance - mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

I have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the financial year ended on 31 st March, 2026 according to the provisions of:

(i) The Companies Act, 2013 (the Act) and the rules made there under;

(ii) The Securities Contracts (Regulation) Act, 1956 (SCRA) and the rules made there under;

(iii) The Depositories Act, 1996 and the Regulations and Bye - laws Framed thereunder;

(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings; [Not Applicable as there was no transaction happened during the period under review]

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (SEBI Act): -

(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

(b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;

(c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018;

(d) The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014; [Not applicable as the Company has not offered any Employee Stock Purchase Scheme during the period under review]

(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008; [Not applicable as the Company has not issued any debt securities during the period under review]

(f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993; [There were no events occurred during the period which attracts provisions of these regulations, hence not applicable];

(g) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; [Not applicable as there was no reportable event during the period under review]

(h) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998; [Not applicable as there was no reportable event during the period under review]

I have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards issued by The Institute of Company Secretaries of India. (ii) The Listing Agreements entered into by the Company with Bombay Stock Exchange Limited read with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015;

During the period under review and as per the explanations and representations made by the management and subject to clarification given to us, the company has generally complied with the provisions of Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above except following observations:

1. During the year under review, the Company has filed certain e - Forms with Ministry of Corporate affairs (MCA) beyond the prescribed time limit specified under the Companies Act, 2013 read with Rules made thereunder.

2. Ms. Aarushi Jain (DIN 10936056) is appointed as Non - Executive Independent Woman Director on the Board of the Company w.e.f. February 3, 2025. Ms. Jain has tendered resignation with effect from May 12, 2025 as Non - Executive Independent Woman Director.

In August, 2025, Mrs. Usha Manish Ghelani (DIN 10414386) and Mrs. Khadija Taher Raniwala (DIN 11237433) are appointed as Additional Non - Executive Independent Directors of the Company.

3. Ms. Reshma Vishal Deshmukh (A68764) is appointed as Company Secretary and Compliance Officer (KMP) of the Company w.e.f. February 3, 2025. Ms. Deshmukh has resigned from the position of Company Secretary, Compliance Officer and KMP of the Company from February 10, 2026.

Ms. Nidhi Sheth (A27041) appointed as Company Secretary of the Company w.e.f. March 9, 2026.

4. The Company has appointed Mr. Akash Dubey (DIN 08731219) as new Chief Financial Officer (CFO) and Managing Director of the Company w.e.f. March 9, 2026. The Company has also appointed Mrs. Jeny Gowadia (DIN 03014009) and Mr. Keyur Shah (DIN: 09420459) as Additional Non - Executive Independent Directors of the Company.

It is observed that Mr. Narendra Mahavirprasad Ruia was appointed as CFO of the Company w.e.f. February 11, 2022. Mr. Ruia continues his position as CFO of the Company till March 27, 2026. Mr. Ruia has resigned from the position of CFO w.e.f. March 27, 2026.

5. The Company has received an ISIN activation Letter on August 20, 2025 from CDSL for the allotment of 2,50,000 cumulative redeemable preference shares of Rs.100/ - .

I further report that

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non - Executive Directors and Independent Directors. There were changes in the composition of the Board of Directors during the period under review in accordance with the applicable provisions of Companies Act, 2013 and other applicable legislation(s).

Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

Majority decision is carried through while the dissenting members views are captured and recorded as part of the minutes.

I further report that there are adequate systems and processes in the company commensurate with the size and operations of the company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

I further report that during the audit period, the Company does not have any events having a major bearing on its affairs in pursuance of the above referred laws, rules, regulations, guidelines, standards, etc.

Signature:
Name of Company Secretary in practice / Firm: PRIYANKA OKA & ASSOCIATES

Date: August 13, 2026
Place: Thane

UDIN: F010084H001105871
Membership Number: F10084
Certificate of Practice Number: 22164
Peer Review Certificate Number: 1921/2022 dt. April 18, 2022