Arnold Holdings Ltd Management Discussions

Annexure-3

ECONOMIC OVERVIEW

GLOBAL ECONOMY SCENARIO

In 2024, the global economy achieved a growth rate of 3.2%, reflecting a measured pace of expansion. Nonetheless, this figure fell short of the historical average of 3.7% recorded from 2000 to 2019. The deceleration was attributed to a confluence of both structural and cyclical factors, including policy tightening in major economies, geopolitical instability, and sector-specific challenges. Together, these elements exerted a profound impact on both advanced and emerging markets, leading to a more subdued global economic environment.

The economic performance of both advanced and emerging economies followed distinctly different trajectories throughout the year. Advanced economies struggled with weak manufacturing activity, faltering consumer confidence, and persistent inflationary pressures, all of which impeded broader economic growth. Rising energy costs, disruptions in global trade flows, and the continued impact of prior monetary tightening further constrained demand. In contrast, emerging markets and developing economies encountered their own set of challenges, including subdued external demand, capital outflows driven by rising interest rates in developed nations, and considerable policy uncertainties. Additionally, trade disruptions and geopolitical tensions significantly contributed to the moderation of growth, particularly in economies heavily reliant on exports. Despite these challenges, certain emerging markets showed strength, supported by strong domestic consumption and targeted fiscal stimuli.

While inflationary trends varied across different economies, global headline inflation showed a significant decrease in 2024, falling from 5.7% in 2023 to 4.2%. This drop was primarily driven by the stabilisation of energy prices and the gradual resolution of ongoing supply chain challenges. Throughout the year, central banks maintained a cautious approach, carefully balancing monetary policy to support economic recovery while ensuring inflation remained on a downward trajectory. Looking ahead, inflation is expected to continue its moderation, potentially reaching 3.5% by 2026, provided geopolitical risks and supply-side shocks remain under control.

Outlook

As we look towards the future, the IMF projects global growth to stabilise at 3.3% in both 2025 and 2026. However, numerous risks persist, particularly emanating from policy uncertainties, trade tensions, and deep-rooted structural challenges in key economies. While the decline in inflation offers some respite, the long-term sustainability of growth will depend on the adoption of effective policy measures, profound structural reforms, and collaborative international efforts to navigate the changing economic landscape. Ensuring robust economic resilience and fostering inclusive growth will be crucial for sustaining stability in the coming years.

INDIAN ECONOMY SCENARIO

Indias economic performance in FY 2024-25 reflects a consistent and robust growth trajectory, with the nations Gross

Domestic Product (GDP) growing by 6.5%, thereby solidifying its status as the fastest-growing major economy. This growth is primarily driven by substantial government investment in infrastructure, a resurgence in rural demand driven by a thriving Kharif crop, and the sustained expansion of the services sector, notably in finance and real estate. The

Reserve Bank of Indias prudent, accommodative monetary policy, which includes an interest rate reduction, has further spurred both investment and consumption. In addition, a marked improvement in manufacturing output and resilient urban consumption have further invigorated the economic momentum. While global trade uncertainties remain an external risk, Indias intrinsic economic strength, coupled with policy interventions and robust private sector investments, is set to underpin continued growth.

Outlook

The Indian economy is projected to experience a growth rate ranging from 6.3% to 6.8% in FY 2025-26, driven by transformative structural reforms, digital evolutions, and a rising wave of consumer demand. Initiatives such as Make in India and the Production-Linked Incentive (PLI) schemes are strengthening the manufacturing sector, channelling significant investments into key sectors like electronics, semiconductors, and renewable energy. In parallel, large-scale infrastructure projects spanning highways, ports, and smart city developments are expected to enhance economic activity and generate substantial employment prospects. With continued policy support and strategic investments, India is well-positioned to sustain its growth trajectory, solidifying its role as a global economic powerhouse.

INDIAN FINANCIAL SERVICES SECTOR SCENARIO

Indias financial services sector has adeptly navigated a fluctuating environment, influenced by evolving monetary policies and shifting global dynamics. The Reserve Bank of India (RBI) initiated a cycle of monetary easing, reducing key policy rates to stimulate economic growth. Despite this, banks struggled with higher borrowing costs, exacerbated by the rising demand for infrastructure bonds. As of February 2025, the liquidity shortfall had escalated to approximately Rs. 1.7 Trillion. To counterbalance this, the RBI intervened with a USD 10 Billion forex swap, designed to stabilise short term interest rates and ensure financial equilibrium. The sectors transformation was further strengthened by rapid technological advancements. The advent of Artificial Intelligence (AI), Open Banking, and digital currencies has become pivotal in refining financial services. The introduction of the Digital Rupee marked a significant step towards a fully cashless economy. AI-driven innovations enhanced both customer experience and risk management, while Open Banking paved the way for broader financial inclusion. Simultaneously, the insurance industry adapted to emerging risks, with health insurers in Delhi considering premium adjustments due to the increasing prevalence of air pollution-related health issues. However, the sector continues to face challenges, including rising levels of unsecured lending and an increase in credit card delinquencies, particularly among younger demographics. The recent interest rate cuts have also placed additional pressure on banks net interest margins. Despite these obstacles, Indias financial services sector remains well positioned for sustained growth and long-term resilience, supported by proactive regulatory measures, robust digital infrastructure, and a persistent commitment to financial inclusion.

NBFCs: An Industry

The NBFC sector played a critical role in supporting economic activity, particularly in the underserved and unbanked segments. Strong credit growth, improving asset quality, and a greater focus on digital transformation contributed to increased operational resilience.

However, the sector continues to operate under a stringent regulatory environment, with RBI reinforcing governance, risk management, and capital adequacy standards under the Scale-Based Regulation (SBR) framework. Non-deposit-taking NBFCs, especially those in the Base Layer, are expected to maintain capital discipline while leveraging digital platforms and analytics to drive responsible credit growth. The economic backdrop, though complex, offers considerable opportunities for NBFCs to grow sustainably by focusing on prudent risk management, diversified lending, and technology-driven efficiencies.

The Non-Banking Financial Companies (NBFC) sector continues to serve as an indispensable pillar in Indias financial framework, playing a pivotal role in enhancing financial inclusion and broadening access to credit. As of FY 2024-25, the sector has expanded to approximately USD 350 Billion, marking a consistent increase from the previous years USD 326 Billion. However, the growth of the sectors Assets under Management (AUM) is forecasted to moderate, with year-on-year growth projections for FY 2024-25 and FY 2025-26 ranging between 15-17%, a decline from the robust 23% recorded in FY 2023-24. This deceleration is attributed to mounting challenges such as rising delinquencies, intensified regulatory frameworks, and tighter funding conditions. Despite these obstacles, essential lending verticals, including SME financing, loans against property (LAP), and used vehicle financing, are poised to continue their growth trajectory, demonstrating the sectors resilience in the face of adversity.

Regulatory and Market Dynamics

Regulatory reforms continue to reshape the NBFC landscape, with the Reserve Bank of India (RBI) implementing scale based regulations to enhance governance, risk management, and operational stability. The focus on diversifying funding sources to reduce reliance on traditional banking channels has become more critical in ensuring liquidity and financial health. Additionally, the sector faces increasing competition from traditional banks and fintech players, necessitating strategic realignments to maintain market relevance. The RBIs emphasis on prudent lending practices, particularly in unsecured loan segments, highlights the need for NBFCs to strengthen their risk assessment frameworks and financial prudence.

COMPANY BUSINESS OVERVIEW

Arnold Holdings Limited is a public limited company incorporated in the year 1981 listed in Bombay Stock Exchange. It is a non-deposit taking; Base Layer NBFC, registered with the RBI vide Registration No. B-13.02130 Ever since its incorporation the company engaged in investment in shares and activity of non-banking finance company.

Our Company is primarily focused in providing inter corporate loans, personal loans, loans against shares & securities, Loans against properties, trade financing, bills discounting, trading in shares & securities. Being an, NBFC our Company has positioned itself between the organized banking sector and local money lenders, offering the customers competitive, flexible and timely lending services.

Products & Services:

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

Trade Finance & Bill Discounting Working capital loans Loan against property

Margin funding and loan against securities Capital market Corporate finance Mortgage and loans Infrastructure finance

FINANCIAL PERFORMANCE:

During the fiscal Year 2025, the operational income of the Company stood at Rs. 19972.57 Lacs as compared to previous fiscal Year of Rs. 20456.68 Lacs. The company has continued its lending activities and advances portfolio of the Company has been Rs. 8027.13 Lacs and the interest income of the Company have been stood at Rs. 903.31 Lacs. This fiscal Year Companys profits have been 532.65 Lacs as compared to Rs. 882.36 Lacs of fiscal Year 2024.

Financial Highlights:

? Income from operation stood at Rs. 19972.57 Lacs for fiscal Year 2025. ? Profit before Taxes of fiscal Year 2025 was Rs. 616.47 Lacs. ? Profit after Taxes of fiscal Year 2025 was Rs. 532.65 Lacs. ? Earnings per share for fiscal Year 2025 were Rs.2.24 per share. ? Net Worth of company stood at Rs. 5790.50 Lacs as on March 31, 2025.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The company is operating as Non-Banking Financial Company and so does not have segment wise performance. The performances are reflected in the balance sheet.

SWOT ANALYSIS:

Strengths:

Diversified Lending Portfolio: The Company serves a wide range of customers across retail, small business, and MSME segments, reducing concentration risk and enabling stable revenue streams.

Strong Regulatory Compliance: Arnold Holdings maintains full compliance with RBIs Scale-Based Regulatory Framework and Companies Act norms, ensuring operational credibility and governance.

Robust Risk Management Framework: A sound credit appraisal process, loan recovery mechanisms, and internal control systems enable effective risk mitigation.

Lean Operational Structure: The Company operates with a lean team and streamlined processes, which helps in maintaining low operational costs and higher profitability margins.

Digital Enablement Initiatives: Progress toward digitizing loan origination, credit evaluation, and customer servicing has increased efficiency and reduced turnaround time.

Weakness:

Branding: Our Company is not a well-established brand among large NBFC players who have access to larger financial resources.

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

Regulatory restrictions: continuously evolving government regulations may impact operations.

Uncertainty: Uncertain economic and political environment.

Opportunities:

Rising Credit Demand from MSMEs and Underserved Segments: The formalization of small businesses and increased financial inclusion initiatives by the government present growth opportunities for NBFCs.

Partnerships with Fintech and Digital Lending Platforms: Collaborations with fintechs can improve reach, credit assessment, and customer onboarding, enabling faster and more agile loan processing.

Expansion into Niche Lending Areas: The Company can explore unsecured loans, supply chain finance, gold loans, or small-ticket consumer finance as high-margin lending verticals.

Digital Platform: Company has own Digital app "TRADOFINA" which provides instant credit loans to personal and small business needs.

Threats:

Economic Downturn: If the economic downturn is prolonged it can reduce the financing need of people due to shrinking business opportunities.

Private Banks: Private Banks are also working on the similar business model as the NBFCs do, thereby giving a very strong competitions to the NBFCs.

Regulatory Changes: Any potential tightening of NBFC regulations by the Regulator could significantly impact operational dynamics and increase compliance-related expenditures.

FUTURE STRATEGY:

Expansion of existing activities: Our Company intends to expand its financial services by enhancing its focus on margin funding, loan against shares and securities, loan against properties and corporate loan, bill discounting and working capital loan.

Differentiated Services: In the growing economy, the corporate clients will be requiring funds for further expansions. Our Company would be providing all diversified service portfolio under one umbrella to cater most of the customer needs and demands.

Brand recognition: We are in such a business where we are facing lot of competition. Our Company is not a well-established brand among large NBFC players. We will be making the necessary arrangements for our brand reorganization.

Conducting regular reviews of business plans and effective liquidity management.

On boarding maximum number of customers through digital platform.

HUMAN RESOURCE

Arnold Holdings Ltd places the highest value on its human capital, acknowledging that the sustained success of the organization is deeply rooted in the competencies, capabilities, and contributions of its people. The Companys core philosophy emphasizes creating a safe, healthy, and fulfilling workplace, where employee well-being and productivity are mutually reinforced.

In line with this belief, Arnold Holdings actively nurtures a culture defined by integrity, honesty, and continuous learning. The Company is deeply committed to equality and upholds a strict zero-tolerance policy against harassment. It strives to provide not just employment, but meaningful careers that foster trust, engagement, and long-term growth. Employees are encouraged to grow within a respectful, secure, and transparent environment that values both performance and character.

The Human Resources function plays an essential role in upholding the Companys values and ensuring that every individual within the organization operates in a culture of openness, inclusivity, and accountability. Through proactive engagement and robust policy implementation, HR serves as a strategic partner in building a workplace that balances operational excellence with employee empowerment.

Arnold Holdings HR policies are thoughtfully designed to prepare employees for a fast-changing and competitive business environment. The Company promotes a performance-oriented culture, one that recognizes and rewards

Individual effort, while also fostering collective achievement. Employees are provided with the tools, training, and opportunities necessary to grow in alignment with the Companys strategic goals. This approach not only enhances internal capabilities but also strengthens the Companys market position in a highly dynamic financial services landscape. As Arnold Holdings looks ahead, its human resource priorities remain focused on attracting, developing, and retaining high-potential talent. Equal opportunity, holistic employee wellness, and a collaborative work environment continue to be the foundation of its HR philosophy. Every process, from recruitment to leadership development, is shaped by the

Companys intrinsic values and a commitment to building an inclusive, future-ready workforce.

Through these ongoing efforts, Arnold Holdings Ltd is steadily cultivating an organizational culture that supports innovation, encourages performance, and aligns its people strategy with its vision for sustainable, long-term growth.

RISKS AND CONCERNS

At Arnold Holdings, risk management is not merely a compliance function it is a core strategic priority, integral to the Companys commitment to safeguarding the interests of its customers, employees, shareholders, and the organization at large. Anchored in the principles of ethical governance and long-term sustainability, the Company has developed a comprehensive and dynamic risk management framework aligned with global best practices and tailored to the evolving landscape of the financial services sector.

The Companys risk management architecture is supported by a structured control mechanism and governed by a deeply embedded culture of risk awareness. This culture extends across all levels of the organization and is continually reinforced through detailed operational guidelines, well-articulated policies, and robust internal controls. This disciplined approach enables the Company to anticipate, identify, assess, and manage a wide spectrum of risks.

The Company monitors and addresses various risk domains including credit risk, market risk, legal and regulatory risk, operational risk, liquidity and interest rate risks, as well as cybersecurity, IT, strategic, and broader economic risks. In light of the increasingly complex risk environment, Arnold Holdings adopts a proactive and preventive approach, conducting in-depth risk evaluations and implementing comprehensive mitigation measures to ensure business continuity and operational resilience.

The Board maintain stringent oversight, ensuring that risk management remains an enterprise-wide responsibility, deeply integrated into the Companys decision-making processes.

By continuously enhancing its risk control systems and governance structures, Arnold Holdings is well-positioned to navigate challenges while maintaining financial stability and stakeholder confidence. This commitment to prudent risk management not only supports regulatory compliance but also fosters sustainable and resilient growth, reinforcing the Companys long-standing reputation as a responsible and forward-looking financial institution.

INTERNAL CONTROLS SYSTEMS AND THEIR ADEQUACY

Arnold Holdings has instituted a comprehensive internal control system that forms the backbone of its operational integrity and governance. Built on a well-structured organizational framework, this system is reinforced through documented policies and an unequivocal authority matrix. It aims to enhance operational efficiency, ensure compliance with internal and external standards, and protect the Companys assets from risk or mismanagement.

The Company recognizes that a robust internal control system is essential for the seamless execution of its day-to-day operations. In response, Arnold Holdings has developed an expansive control mechanism that integrates business process controls, financial reporting accuracy, fraud prevention, and regulatory compliance, all of which align with global best practices and industry benchmarks.

Internal controls are embedded across all functions, ensuring consistency, reliability, and efficiency in operations. This structure is uniformly applied across the organization and serves to protect corporate assets, prevent unauthorized transactions, and uphold the highest standards of governance. Controls are designed to guarantee that every transaction adheres to established protocols and is backed by accurate documentation and verification mechanisms.

The Audit Committee of the Board plays a crucial oversight role by systematically reviewing internal audit reports and ensuring that the financial control systems are operating effectively. The scope and coverage of internal audits are determined based on detailed risk assessments, materiality, and process impact evaluations, ensuring that areas of highest risk are prioritized.

Arnold Holdings Ltd Audit Committee routinely reviews internal audit reports. The Company maintains, in all material respects, adequate internal financial control over financial reporting, which operates effectively. Internal audits are conducted to assess the adequacy of internal control systems and compliance with policies and procedures. The areas of internal audit are planned based on inherent risk assessment, risk scores and other factors such as probability, impact, significance and the strength of the control environment. The adequacy and operating effectiveness of internal controls are assessed and tested. Additionally, Arnold Holdings Ltd has formulated a risk-based internal audit policy as part of its oversight function. The objective of risk-based internal audit reviews is to identify key activities and controls in business Processes, review the effectiveness of these processes and controls. It also involves assessing the operating effectiveness of internal controls and providing recommendations for business processes and internal control enhancements.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIO:

1. CURRENT RATIO:

Increase in Bank Balances & Inventory and decrease in Trade Payables has resulted in increase in current ratio which indicates strong liquidity position of the company.

2. DEBT EQUITY RATIO:

There has been an Increase in Borrowings of 2,404 Lakhs which is a 40% increase compared to previous year. Hence there is an increase in Debt Equity Ratio

3. DEBT SERVICE COVERAGE RATIO:

The company generates sufficient income to cover its Debt payments.

4. RETURN ON EQUITY RATIO:

The company has generated a 9.25% return on shareholders Equity as compared to 15.43% last year due to decline in profits in current year caused by unfavorable market conditions.

5. TRADE RECEIVABLES TURNOVER RATIO:

6. NET CAPITAL TURNOVER RATIO:

7. NET PROFIT RATIO:

The company has a positive Net Profit Ratio which indicates the overall business profitability. The company is profitable and efficient in managing its costs but in current year the profit has declined due to unfavorable market conditions in the second half of the year.

8. Inventory Turnover Ratio:

The Inventory Turnover ratio has increased due to higher Inventory in March 25 as compared to March 24.

9. Operating Profit Margin:

The reason for decline on Operating Margin ratio is due to decline in profit in current year due to unfavorable market conditions in the second half of the year.

10. RETURN ON CAPITAL EMPLOYED

A high Return on Capital Employed (ROCE) signifies that a company is efficiently using its capital to generate profits although there is a decline in current year due to unfavorable market conditions.

11. INTEREST SERVICE COVERAGE RATIO:

The ICR is a solvency ratio that focuses on a companys capacity to cover its interest obligations. The company has a high ICR of above 2.0 which indicates that the company can comfortably cover its interest payments although there is a reduction due to decline in profits in current year.

(Figures in Lakhs)

(In view of nature of business and various components of financial statements, other Ratios as mentioned in Schedule III are not applicable to the Company. Auditor has already mentioned the reasons for variance more than 25% in audit report).

CAUTIONARY:

Statements made in this Management Discussion and Analysis Report may contain certain forward-looking statements based on various assumptions about the Companys present and future business strategies and the environment in which it operates. Actual results may differ substantially or materially from those expressed or implied due to risk and uncertainties. These risks and uncertainties include the national and global effects of economic conditions, political conditions, volatility in interest rates, changes in regulations and policies impacting Companys businesses and other related factors. The information contained herein is as referred to. The Company does not undertake any obligation to update these statements. The Company has obtained the data and information referred here from sources believed to be reliable or from its internal estimates, the accuracy or completeness of which cannot be guaranteed.

Place: Mumbai	For the Board of Directors
Date: 12.08.2025	Arnold Holdings Limited
	Sd/-	Sd/-
	Murari Mallawat	Munni Devi Jain
	Whole Time Director	Chairperson
	DIN: 08809840	DIN: 08194500