Aryaman Financial Services Ltd Management Discussions

Aryaman Financial Services Limited (the Company) is a SEBI-registered Category I Merchant Banker with a proven track record spanning over a decade in the field of merchant banking. Our firm offers a comprehensive range of financial and consultancy services, including expertise in capital markets, corporate finance, corporate restructuring, debt syndication, and compliance advisory.

Our Company is a SEBI-registered Category I Merchant Banker. The Company is engaged in the business of lead management and syndication of small and medium sized initial public offerings (IPOs), follow on public offer (FPOs), rights issues, composite issues, qualified institutional placement (QIPs), private investment in public equity (PIPE) deals, venture capital (VC) funding and other forms of fund raising.

The company mainly participates in the SME Segment of the Primary market issues. SME Platform offers an entrepreneur and investor-friendly environment, which enables the listing of SMEs from the unorganized sector scattered throughout India into a regulated and organized sector. The platform provides an opportunity for SME entrepreneurs to raise equity capital for growth and expansion. It also provides an immense opportunity for investors to identify and invest in good SMEs at an early stage.

During the financial year 2024-25, the company has completed and listed various client companies on either on SME or the Main Board of BSE Limited and NSE Limited. Since our establishment, our primary goal has been to offer a comprehensive range of financial and capital market services to esteemed clients throughout India.

SEBI, in its Board Meeting held on December 18, 2024, approved the categorization of Merchant Bankers into two classes. Category I Merchant Bankers are permitted to undertake the entire range of activities, including acting as lead managers for Main Board IPOs. A key requirement for Category I Merchant Bankers is maintaining a minimum net worth of ?50 crores. The Company has already met this requirement by issuing 5,65,000 equity shares of ?10 each at a premium of ?235, thereby strengthening its net worth to the prescribed level.

The Companys principal products/services include income from merchant banking fees. It also acts as lead manager to mergers and acquisitions (M&A) transactions, open offers, delisting offers, and buybacks, among others. The Company provides valuation and advisory services for foreign investments, employee stock option plans (ESOPs) certifications, fairness opinions of amalgamation schemes, mergers, and spin-off transactions, among others. The Company, through its subsidiary and group companies, provides stock and commodity broking services.

Industry Structure and Developments of a Merchant Banker Overview:

The merchant banking industry plays a crucial role in the financial services sector, focusing on capital raising, financial advisory, and other services for corporate entities. Merchant bankers act as intermediaries between issuers of capital and the investors, offering a range of services, including underwriting, loan syndication, M&A advisory, and fundraising for companies of various sizes, particularly in the small and medium enterprises (SME) segment.

Industry Structure:

1. Regulatory Environment:

o SEBI Registration: In India, merchant bankers must be registered with the Securities and Exchange Board of India (SEBI). SEBI regulates the activities of merchant bankers, ensuring that they adhere to stringent guidelines to maintain transparency, protect investor interests, and uphold market integrity. o Category Classification: Merchant bankers are categorized into different types based on their level of activity, with Category I being the most comprehensive, allowing for activities such as managing public issues, mergers and acquisitions, and providing advisory services.

2. Key Players:

- Large Financial Institutions: These include banks and financial conglomerates that offer merchant banking as part of a broader suite of financial services.

- Boutique Merchant Banks: Specialized firms focusing on specific segments like M&A advisory, private placements, or SME fundraising.

- Independent Advisors: Smaller, independent firms or individuals providing tailored merchant banking services, often with a focus on niche markets or sectors.

3. Service Offerings:

- Equity Capital Markets: Includes managing IPOs, FPOs, rights issues, QIPs, preferential allotment and FCCB/ ADR/GDR

- M&A and Open Offer: Providing buy-side services, sell-side services, Takeovers/Open offers, and Delisting/ Buybacks

- Other Services: Offering PE Funding/VC Funding, Structured Finance Advisory, Corporate Finance Advisory, Debt Syndication/Project Finance, and AIF Services

Developments in the Industry:

1. SME Segment Focus:

- The SME sector has seen significant attention, with merchant bankers playing a critical role in facilitating access to capital for these businesses. The growth of dedicated SME platforms on stock exchanges has created new opportunities for merchant bankers to cater to the unique needs of this sector.

2. Digital Transformation:

- The adoption of technology in financial services is reshaping the merchant banking landscape. Digital platforms are streamlining the process of fundraising, M&A transactions, and due diligence, making the industry more efficient and accessible to a broader range of clients.

3. Increased M&A Activity:

- With globalization and market consolidation trends, there has been a rise in mergers and acquisitions, particularly cross-border transactions. Merchant bankers are increasingly involved in these complex deals, providing critical advisory services.

4. Regulatory Changes:

- The regulatory environment is evolving, with SEBI and other regulatory bodies implementing new rules to enhance market transparency, protect investors, and adapt to changing market dynamics. This includes reforms in IPO regulations, enhanced disclosure norms, and stricter compliance requirements.

5. ESG Considerations:

- Environmental, Social, and Governance (ESG) factors are becoming increasingly important in investment decisions. Merchant bankers are now advising clients on integrating ESG considerations into their capital raising and corporate strategies, reflecting the growing investor demand for sustainable and responsible investments.

6. Globalization and Cross-Border Deals:

- The rise of cross-border deals and foreign investments has led to the globalization of merchant banking services. Firms are expanding their reach to cater to international clients, necessitating a deep understanding of diverse regulatory environments and cultural nuances.

7. Growth in Private Equity and Venture Capital:

- The rise of private equity and venture capital as significant sources of funding has seen merchant bankers increasingly engage in PIPE deals, venture funding rounds, and advising startups and growth-stage companies.

8. Challenges and Opportunities:

- The industry faces challenges such as economic volatility, regulatory complexities, and competition from alternative financing sources. However, opportunities abound in emerging markets, digital finance, and sustainable investing, which are reshaping the future of merchant banking.

The merchant banking industry is integral to the financial ecosystem, particularly in fostering the growth of SMEs and facilitating complex financial transactions. As the industry evolves, driven by technological advancements, regulatory changes, and shifting market dynamics, merchant bankers must adapt to maintain their relevance and continue delivering value to their clients.

Financial Services in India

India has a diversified financial sector undergoing rapid expansion, both in terms of the strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds, and other smaller financial entities. The banking regulator has allowed new entities, such as payment banks, to be created recently, thereby adding to the type of entities operating in the sector. However, the financial sector in India is predominantly a banking sector, with commercial banks accounting for more than 64% of the total assets held by the financial system.

The Government of India has introduced several reforms to liberalise, regulate, and enhance this industry. The Government and Reserve Bank of India (RBI) have taken various measures to facilitate easy access to finance for Micro, Small, and Medium Enterprises (MSMEs). These measures include launching the Credit Guarantee Fund Scheme for MSMEs, issuing guidelines to banks regarding collateral requirements, and setting up a Micro Units Development and Refinance Agency (MUDRA). With a combined push by the Government and private sector, India is undoubtedly one of the worlds most vibrant capital markets.

Global Capital Market 1

The year 2024 witnessed 1,159 listings globally, down from 1,371 in 2023. In terms of capital raised, the amount was USD119.1 billion, a 10 per cent decline compared to 2023. The National Stock Exchange of India (NSE) was at the top in terms of the exchange with maximum funds raised, of USD17.3 billion, closely followed by NASDAQ with USD16.5 billion raised in 2024. The Shenzhen and Shanghai stock exchanges, witnessed a considerable decline in fund raise, owing to tighter scrutiny of new listings by Chinas securities market regulator, which is seeking to improve the quality of new listings and enhance the responsibilities of sponsors and stock exchanges. This move by their regulator led to an exodus of companies, opting to list on the Hong Kong Stock Exchange (HKEX), which reclaimed a place in the top five rankings of stock exchanges globally, by witnessing capital raise to the tune of ~HKD 82.9 billion, an increase of 80 per cent compared to 20231,2. Globally, in 2024, private equity capital fund raise continued its downward trend since 2021, in terms of total funds raised through this route. The amount in 2024 was ~USD680 billion, compared to ~USD1,119 billion in 2021. PE exits were at a five-year low of ~USD392.5 billion, primarily due to divergence in valuation expectations. PE fund launches mirrored the trend witnessed under PE fund raise, with 1,061 launches in 2024 compared to the peak level of 4,545 in 2021.

Indian capital markets 2

FY 2024-25 was a volatile year for the Indian capital markets, to say the least. While the continuity in the Central Government, post-election results in the first quarter of the financial year, was broadly viewed as neutral-to-positive by the capital markets, net FPI sell-off in the equity segment in five out of the six months in the second half of the financial year, consequently dampened the sentiments in the primary market segment, with Q4 FY25 witnessing just 11 mainboard IPOs, the lowest of all four quarters of the financial year. Further, in the month of April 2025, the net FPI outflow (combined) was ~INR202 billion, primarily driven by the outflow in the debt segment. On a positive note, the equity segment witnessed net inflow in the month of April 2025, driven by relative easing of global trade related restrictions by the US on its trading partners and the more recent developments of a trade deal between the US and the UK, and the temporary pause on reciprocal tariffs between the US and China, both together are expected to moderately reduce the volatility in the global markets, at least over the short term.4 India witnessed 80 mainboard IPOs in FY25, as compared to 76 in FY24. Both the averages of QIB and retail oversubscriptions of IPOs were higher in FY25, compared to FY24. On a positive note, nine out of 12 months of FY25 witnessed net FPI inflows, in the debt segment5. In FY25, India witnessed venture financing to the tune of ~USD15 billion. This was higher than the figure in FY24, of ~USD12.5 billion, but lower than the figure in FY23, of ~USD18 billion.

Indian equity market is meeting the global pace.

A report by the National Stock Exchange (NSE) reveals that one-fifth of Indian households are now connected to the stock markets, with the market capitalisation of Indian companies growing sixfold over the past decade. The number of stock market-linked accounts has crossed 21 crore, with over 18 crore demat accounts. In 2024 alone, India saw a record 2.32 crore new investors, the highest ever in a single year. This surge in participation has contributed to substantial wealth creation for Indian households, with equity investments increasing household wealth by over Rs. 40,00,000 crore (US$459.24 billion) in the past five years and Rs. 13.2 lakh crore (US$151.55 billion) in 2024 alone. Indian stock market Sensex reached a high of 81,596 on May 21, 2025. In FY25, India saw 192.4 million demat accounts added amid gains in the secondary market and record initial public offerings (IPOs). India has scored a perfect 10 in protecting shareholders rights on the back of reforms implemented by the Securities and Exchange Board of India (SEBI) in the World Banks Ease of Doing Business 2020 report.

Overall IPO Activity and Growth

SME Listings: The year 2024 witnessed a remarkable surge in SME IPOs, with 243 companies being listed on the SME platforms (NSE Emerge and BSE SME), a notable increase from the 179 listings in 2023. This reflects a 35.8% year-on-year growth in the number of companies opting for the SME route to raise capital.

• Mainboard Listings: In parallel, the mainboard market also saw a growth in listings, with 83 companies listing on BSE and NSE, compared to 60 listings in 2023.

• Fund Raise via SME Platforms: The total funds raised via the SME IPOs crossed a significant milestone, exceeding Rs 9,000 crore in 2024.

• Mainboard IPO Fund Raise: Total fund raised through mainboard IPO listings was Rs 1,71, 051 crores

Opportunities and Threats of a Merchant Banker Opportunities:

1. Government support for entrepreneurship and ease of doing business, leading to increased startups and small businesses.

2. SME exchange making it easier for SMEs to get listed.

3. Rising private equity and venture capital penetration, resulting in increased M&As and IPOs.

4. Revival of the Indian Equity market post-lockdown, reviving IPO deals and demand for merchant bankers.

5. Growth in foreign direct investment and promoter funding, driving demand for merchant bankers.

6. Increased funding transactions requiring valuation certifications.

7. Positive long-term economic outlook, leading to opportunities for financial services.

8. Rising domestic flows of funds in equity markets through mutual funds and direct investment.

9. Growing retail investor participation in the IPO market, benefiting the Indian broking industry.

10. Strong equity research cell, supporting corporate advisory and merchant banking services.

Threats:

1. Capital Market volatility due to interest rate hikes, monsoon performance, tax concerns, global events, and domestic political events.

2. Intense competition leading to downward pressure on fees and commissions.

3. Adverse events affecting the capital market and resource raising.

4. Low capital base, limiting expansion and Net Worth growth.

5. Limited dealing branches and franchisee outlets.

6. Intense market competition, particularly in institutional broking.

By navigating these opportunities and threats effectively, merchant bankers can continue to grow their business and deliver value to their clients in a dynamic and competitive market environment.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY:

The Company has established robust internal control systems that are adequate and effective, tailored to the size and nature of its business. These controls are managed by competent leadership and include the implementation of standard policies, processes, and an appropriate audit program. The internal control environment is supported by effective risk monitoring and management information systems.

To ensure continuous improvement, the Company regularly updates these systems in line with best practices. An Audit Committee, chaired by a Non-Executive Independent Director, has been constituted by the Board. This Committee periodically reviews internal audit reports and highlights any significant process deviations to the Board.

The Companys internal control system is designed to safeguard assets and protect the interests of the business. It ensures that the adequacy and effectiveness of internal controls are comprehensively monitored across all organizational activities, including compliance with established systems and policies. Well-defined policies and processes govern major activities, including approval authorities, and monetary decisions are subject to set limits and authorizations.

The internal controls are structured to provide reasonable assurance regarding accurate recording of financial and operational information, compliance with applicable statutes, safeguarding assets from unauthorized use or losses, and ensuring proper authorization for transactions.

The system also ensures compliance with corporate policies, laws, and accounting standards. The Audit Committee, detailed in the Corporate Governance Report, plays a critical role in reviewing audit procedures and internal controls on an ongoing basis. The Committee assesses the adequacy of current systems in light of organizational requirements, growth prospects, and the evolving business environment. It also reviews internal audit findings, ensures that corrective actions are implemented, and follows up on suggestions for improvement.

ANALYSIS OF FINANCIAL PERFORMANCE / DISCUSSION OF FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

We are pleased to report a significant improvement in our financial performance, driven by a combination of favorable market conditions and several key assignments in Merchant Banking.

The following summary highlights our financial results for the past two years:

Standalone and Consolidated Financial Performance:

(Rs. in lakhs)

Particulars	Consolidated		Standalone
	31-Mar-2025	31-Mar-2024	31-Mar-2025	31-Mar-2024
Total Income	11809.60	7004.66	2116.24	1593.52
Profit after Tax	4520.07	2750.67	611.84	379.91

OVERALL PERFORMANCE

The Company reported a strong financial and operating performance for the fiscal year 2024-25, marked by a significant 32.18% increase in total revenue from operations, which soared to ?1996.80 Lakhs from ?1510.69 Lakhs in the previous year, and a notable 44.22% rise in other income, which climbed to ? 119.44 Lakhs from ? 82.82 Lakhs, primarily attributed to the successful execution of strategic initiatives, targeted investments, and effective market positioning, which collectively drove business growth and bolstered the Companys financial stature.

FUTURE OUTLOOK:

Over the years, India has emerged as one of the fastest-growing economies in the world, and it now offers a growing and thriving environment for investments, both domestic and foreign. With the largest youth population in the world, it provides prospective investors with a highly skilled workforce and a strong work ethic.

The Indian IPO market in 2024 has experienced significant growth, particularly in the SME (Small and Medium Enterprises) sector, marking it as a milestone year for both listings and funds raised.

The outlook for the IPO market in 2025 is cautiously optimistic, supported by robust market activity in 2024. Several factors will drive the market dynamics:

1. Continued Growth in SME IPOs: With enhanced regulatory frameworks and more transparency, 2025 might see an even higher number of SME listings, as strong businesses seek capital for expansion and innovation.

2. Sectoral Diversification: Sectors like renewable energy, technology, fintech, and e-commerce will likely continue to dominate, but the inclusion of more traditional sectors like pharma, manufacturing, and automobile may also grow.

3. Upcoming IPOs- 190 DRHPs are filed for upcoming IPOs in the Year 2025 in the SME segment and 86 in the Mainboard segment.

4. Large IPOs in Mainboard: With major IPOs already scheduled for 2025; the mainboard market is expected to remain active, with potential for further large fund raises.

5. Global Economic Factors: Any global market uncertainty, including inflation concerns, interest rate hikes, or geopolitical issues, could temper the IPO market activity. However, Indias strong economic fundamentals and growing middle-class population continue to make it an attractive investment destination.

6. Investor Sentiment: If retail and institutional investor sentiment remains strong, particularly post-2024s high returns, one can expect a solid year ahead for IPOs.

RISKS AND CONCERN:

Risks are an inherent part of financial markets. Acknowledging this reality, SEBI has continually worked towards minimizing systemic and operational risks, even for intermediaries like your Company. While the Company operates in a dynamic environment, it faces exposure to various disruptive forces—technological advancements, regulatory and taxation changes, and intense competition.

Despite these challenges, the Company remains committed to strengthening its risk resilience while pursuing growth. A diversified suite of services catering to a broad client base provides inherent risk diversification. The broking business is supported by robust risk management systems, and prudent asset allocation strategies are employed in proprietary investments to align risks with investment horizons.

A comprehensive risk assessment framework is in place to identify, evaluate, and mitigate emerging risks at an early stage. At the operational level, risk management is an ongoing process that encompasses the identification, analysis, and control of a wide range of risks. Key risk areas and the Companys strategic responses are outlined below:

Risk	Concern	Response
Economic and political risk	Arises from macroeconomic factors such as political instability, foreign exchange volatility, and crude oil price fluctuations.	The Company\u2019s agile business model enables quick re-strategiz- ing to address shifting economic and political landscapes.
Financial and market risk	Includes uncertainty in capital markets and negative investor sentiment, which may dampen investment activity.	Diversified revenue streams, deep research capabilities, and a seasoned team enable the Company to maintain operational stability and investor confidence.
Competition risk	Threat of losing market share to established players or new entrants.	The Company remains focused on customer-centricity, supported by a robust digital infrastructure and strong risk management practices, ensuring sustainable growth amidst competition.
Regulatory and compliance risk	Evolving regulations may impact operations. Non-compliance may result from oversight or gaps in internal controls.	A dedicated compliance team ensures adherence to all statutory requirements, while transparent disclosures and regular audits uphold governance standards.
Human resources risk	Employee attrition, low morale, or inadequate talent development can affect productivity.	The Company adopts a human capital risk framework that promotes a performance-driven culture, backed by structured training, induction, and incentive programs.

RISK MANAGEMENT:

The Chairman and the Board of Directors oversee managements processes for identifying, assessing, and monitoring risks that may impact the Companys objectives, operations, or assets. This involves recognising potential threats, analysing their likelihood and impact, and developing strategies to mitigate, transfer, accept, or eliminate them. The Board ensures the implementation of effective policies, control procedures, and a robust risk management framework, while regularly reviewing management information systems and internal controls. It also examines reports from internal and external auditors, monitors audit progress, evaluates managements responses to recommendations, and investigates any significant control breakdowns. Additionally, the Board assesses the Companys risk profile, recommends acceptable risk levels, and reviews insurance coverage to provide adequate protection against key risks. Continuous monitoring and updating of measures ensure that the Companys risk management remains effective and aligned with strategic objectives.

KEY RATIOS

PARTICULARS	2024-25	2023-24	Change in ratios in %
Current ratio	10.88	10.55	3.1%
Debt- Equity Ratio	0.04	0.04	-4.2%
Debt Service Coverage Ratio	N. A	270.74	-100%
Inventory Turnover Ratio	N. A	N. A	N.A.
Return on Equity Ratio	0.15	0.13	13.5%
Trade Receivable Turnover Ratio	141.97	161.69	-12.2%
Trade Payable Turnover Ratio	260.90	50.29	418.8%
Net Capital Turnover Ratio	1.09	1.35	-19.7%
Net Profit Ratio	0.31	0.25	21.8%
Return on Capital Employed	0.16	0.17	-2.4%
Return on Investment	0.03	0.03	-12.3%

REASONS FOR MORE THAN 25% VARIANCE

PARTICULARS	REASONS FOR VARIANCE
Debt Service Coverage Ratio	Decreased due to the Company having no outstanding debt during the current year.
Trade Payable Turnover Ratio	Increased due to a reduction in average trade payables during the year.

MATERIAL DEVELOPMENT AT HUMAN RESOURCES:

The company believes our people are the cornerstone of our success. We firmly believe that it is their dedication, expertise, and passion that enable the Company to consistently outperform. Recognizing this, we remain committed to fostering a workplace culture that respects and empowers our employees, motivates them to achieve their best, and supports their professional development. True to our guiding principle—Your Success is Our Success—we strive to create an environment where performance is valued, achievements are celebrated, and growth is continuous.

Our workforce represents a vital intellectual capital resource, fundamental to sustaining our long-term growth and operational excellence. The Company is proud to have a team of skilled, experienced, and dynamic professionals who drive strategic thinking, operational efficiency, and innovation in line with evolving industry needs.

To enhance capabilities and ensure future readiness, we conduct regular training and development programs focused on both technical skills and personal growth. Our leadership development framework includes rigorous potential assessments and structured initiatives to identify and groom future leaders, thereby ensuring a robust pipeline for succession planning across critical roles.

As a forward-looking and performance-driven organization, we place strong emphasis on professionalism and meritocracy. Multiple

HR initiatives have been undertaken to strengthen both individual and organizational productivity. Additionally, we remain deeply committed to providing a safe, inclusive, and stimulating work environment where every individual can thrive and contribute meaningfully.

Through these efforts, we continue to build a resilient, future-ready workforce aligned with our strategic goals.

SAFE HARBOUR:

In this Annual Report, we have disclosed forward-looking information to enable investors to comprehend our prospects and take investment decisions. This report and other statements - written and oral - that we periodically make contain forward-looking statements that set out anticipated results based on the managements plans and assumptions. We have tried, wherever possible, to identify such statements by using words such as anticipate, estimate, expects, projects, intends, plans, believes and words of similar substance in connection with any discussion of future performance.

We cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in our assumptions. The achievements of results are subject to risks, uncertainties, and even inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected. Readers should keep this in mind. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.