Ashika Credit Capital Ltd Management Discussions

Global Economy

The global economy demonstrated resilience through 2024 (Calendar Year 2024), recording an expansion of 3.2%, according to the IMF World Economic Outlook (April 2025). However, escalating trade frictions and increasing policy unpredictability are expected to weigh heavily on global growth momentum. For CY2025, the world economy is projected to moderate to 2.8%, followed by 3% in CY2026, which remains well below the historical average of 3.7% (2000–2019) due to ongoing structural challenges.Whilerobustrealincomegainsandeasing interest rates supported economic activity, weaker public expenditure, subdued consumer sentiment, and fluctuating external demand constrained growth in certain geographies.

Within advanced economies, the United States is expected to slow to 1.8% in CY2025, impacted by rising policy uncertainty, softening demand, and trade-related tensions. The euro area is projected to expand 0.8% in 2025, with an improvement to 1.4% in 2026 as financial conditions ease. Other advanced economies are anticipated to maintain steady growth, with income recovery counterbalanced by trade headwinds.

In emerging markets and developing nations, economic growth is likely to ease to 3.7% in 2025, reflecting the effects of recent trade restrictions.

Chinas growth outlook has been revised down to 4% in 2025, amid lingering tariff impacts and prolonged trade-policy uncertainty. In contrast, India is expected to maintain stability, with growth forecast at 6.2% for 2025 and 6.3% for 2026, aided by sustained private consumption, particularly in rural areas.

Global trade volumes rose by US$1.2 trillion in 2024, reaching US$33 trillion, supported by 9% growth in services trade and 2% in goods trade. Notably, trade in developing economies grew faster than in advanced economies, with China and India outperforming, while several developed nations experienced contractions. However, with the Trump 2.0 administration introducing new tariffs, and the likelihood of reciprocal actions from major trade partners, the global economy faces a phase of elevated trade tensions. Despite this, Indias trade outlook remains resilient, backed by a strong services base, proactive domestic reforms, and strategic export diversification into high-value segments such as electronics and pharmaceuticals.

Looking ahead, global growth is expected to moderate further to 2.8% in CY2025, shaped by new bilateral tariff regimes and rising geopolitical and policy uncertainties.

India continues to consolidate its position as a major global economic powerhouse. Retaining its rank as the fifth-largest economy, it remains the fastest growing among large economies and is projected to become the third-largest economy by 2027, surpassing a GDP milestone of US$5 trillion, trailing only the USA and China. For CY2025, Indias growth is forecast to remain robust at 6.2%, supported by resilient domestic demand.

Indias export performance has shown impressive momentum over the past decade. In FY 2025, total exports reached 69.1 trillion (US$825 billion), marking a 6% increase compared to 65.2 trillion (US$778 billion) in FY 2024. Over this period, Indias share in global merchandise trade improved from 1.66% to 1.81%, elevating its global ranking from 20th to 17th position.

Indias foreign exchange reserves experienced notable fluctuations in FY 2024-25. Reserves peaked at an all-time high of US$704 billion in September 2024, before easing by 6.5% to US$659 billion by March 2025, partly due to the Reserve Bank of Indias interventions aimed at curbing excessive volatility in the Indian Rupee.

The countrys digitalisation journey has been transformative, reshaping economic activity at an unprecedented pace. By 2030, the digital economy is projected to account for one-fifth of Indias GDP, outpacing the growth of traditional sectors. According to the State of Indias Digital Economy Report 2024, India now ranks as the third-most digitalised economy globally and 12th among G20 nations in terms of digital adoption by individual users.

The Union Budget 2025–26 has been crafted to sustain growth while maintaining fiscal prudence With measures to simplify regulations, support MSMEs, enhance exports, and attract investments, the budget lays down a clear roadmap towards Viksit Bharat 2047. Its emphasis on tourism, healthcare, and manufacturing is expected to generate employment opportunities. Furthermore, a targeted fiscal deficit of 4.4% for FY 2026 underscores governments commitment to fiscal consolidation, debt sustainability, and macroeconomic stability, encouraging greater private sector participation.

India is expected to remain relatively shielded from global headwinds, maintaining its strong growth trajectory. The countrys long-term structural growth drivers remain intact, supported by favourable demographics, stable governance, and ongoing infrastructure development. As per the IMFs World

Economic Outlook Report, India will continue to lead as the fastest-growing major economy, with growth underpinned by an expanding services sector, a strengthening manufacturing base, and supportive government policies aimed at improving infrastructure and rationalising tax regimes.

India continues to hold its place as the fourth-largest equity market globally, with a market capitalisation exceeding US$4.0 trillion.

The Indian equity market closed FY 2025 with modest gains, despite notable foreign portfolio investor (FPI) outflows in the latter half of the year. The Nifty index delivered positive returns, outperforming certain Asian benchmarks such as Nikkei 225 and the Korea Composite Stock Price Index, while the Hang Seng Index topped regional charts with a remarkable 39.8% return.

Midcap and smallcap indices on the NSE and BSE had a strong finish to the year, fuelled by market recovery, heightened retail participation, and attractive valuations. The Nifty Midcap150 and Nifty500 rose 7.6% and 5.4%, respectively, while the BSE Smallcap index gained 8% and the midcap index advanced 5.6%. By comparison, the Sensex posted a 5.1% increase during the same period. Despite earlier concerns over valuations and market volatility, renewed optimism in the broader markets helped sustain momentum in these segments.

Indias economic progress over recent decades has been closely linked to the deepening of its capital markets. They have played a pivotal role in capital formation, increasing financialisation of household savings, and creating wealth for millions of investors. The total investor base grew exponentially—from 2.3 crore in FY 2015 to 19.2 crore in FY 2025, reflecting a CAGR of 23% over the decade. One of the most significant post-pandemic trends has been the surge in retail investor participation, visible in the rapid growth of demat accounts. In FY 2021, the total demat accounts stood at 5.5 crore, which surged to 19.2 crore by FY 2025, expanding at a CAGR of 37%. In the last fiscal alone, 4.1 crore new accounts were added, with CDSL contributing 3.74 crore of these additions.

FY 2025 witnessed an unprecedented year for IPOs, both in scale and activity. A total of 318 companies, including 79 mainline and 239 SME listings, collectively raised 1.72 trillion, exceeding the combined total of the previous two fiscal years (FY 2023-24 and FY 2022-23). Of this, 1.6 trillion was mobilised through the main board, with SMEs contributing the remainder. The average issue size more than doubled year-on-year, climbing to 2,082 crore from 815 crore.

Foreign institutional investors, despite secondary market outflows, remained active in the primary market, subscribing to 1.21 trillion worth of issues.

The active client base on NSE has also grown significantly, rising at a CAGR of 25% from 0.5 crore in March 2015 to 4.9 crore in March 2025, reflecting the widening retail participation and democratisation of equity investments.

Source: Business Standard

Source: NSE

FY 2024-25 was marked by several defining developments:

The new income tax bill was tabled.

Foreign institutional investor outflows reached record levels in the secondary market.

India witnessed its largest-ever IPO—the listing of Hyundai Motor India.

On the political front, Narendra Modi secured a third term, while Donald Trumps return to the U.S. presidency brought fresh tariff measures, fuelling global trade uncertainties.

During the year, Indian markets saw heavy FII outflows in the secondary market, especially in Q4. However, primary inflows via IPOs during the initial nine months of FY 2024-25 offset much of these outflows. Domestic institutional investors (DIIs) also provided consistent support, preventing a sharper market correction.

FY 2024-25 also saw several SEBI circulars aimed at strengthening market structure and limiting speculative retail behaviour, as a study highlighted 93% of retail F&O traders incurred losses between FY 2021-22 and FY 2023-24. Key regulatory measures included: Implementation of true-to-label pricing by intermediaries Upfront collection of option premiums Intraday monitoring of position limits

Removal of calendar spread benefits on expiry day

Increase in minimum contract size

Rationalisation of weekly index options—restricting them to a single benchmark index per exchange Higher margin requirements near contract expiry

India, as one of the worlds fastest-growing major economies, continues to provide a favourable environmentfortheexpansionofitscreditmarkets.The total NBFC credit outstanding stood at approximately

52 trillion as of December 2024 and is projected to cross 60 trillion by FY 2025-26, underscoring the sectors sustained growth trajectory.

Within the overall lending landscape comprising banks, NBFCs, and All-India Financial Institutions, NBFCs have consistently maintained a 21–24% share of total credit from FY 2016-17 to FY 2023-24, highlighting their critical role in Indias financial ecosystem. As the country works towards becoming a US$5 trillion economy, the demand for credit will continue to rise, further cementing the importance of NBFCs in driving economic growth and enabling access to finance.

Retail loans remain the cornerstone of NBFC growth, accounting for 58% of total NBFC credit as of December 2024. Within this segment, unsecured business loans formed 28% of retail NBFC credit, reflecting rising demand for small-ticket, short- ANNUAL REPORT 2024-25 tenure financing. However, the Reserve Bank of India, concerned about the rapid expansion in unsecured personal loans and credit card portfolios, raised risk weights on unsecured retail loans by 25 bps to 125%, prompting tighter risk management practices.

In FY 2024-25, certain asset segments, including microfinance, personal loans, credit cards, and unsecured business loans, faced higher stress, resulting in elevated delinquencies and write-offs. Despite these challenges, NBFCs have strengthened their balance sheets over the years, with reduced leverage, improved asset quality, and a strategic shift towards the retail segment.

The sector is also leveraging digital data and technology to enhance credit assessment and improve operational efficiency. Investor confidence remains strong, supported by sustained equity interest and an untapped pool of overseas debt capital offering additional growth avenues.

With this stable foundation and adaptive capabilities, NBFCs are well-positioned to navigate an evolving regulatory environment while maintaining growth momentum and supporting Indias broader economic development.

Expanding revenue streams through strategic partnerships in non-lending financial services and co-lending arrangements.

Rising potential for ecosystem partnerships and platform-based collaborations, enabling wider reach and enhanced offerings.

A growing middle class with evolving and diverse financial needs, creating demand for customised solutions.

A strengthening economy, increasing levels of formalisation, and rapid digital adoption, opening new avenues for innovation and scale.

Leveraging advanced analytics and artificial intelligence to drive operational efficiency and improve risk management.

Growing investor activity is driving demand for loans against securities, creating a strong lending opportunity.

Volatile and evolving capital markets present attractive avenues for tactical and long-term investments.

Global political uncertainties that may impact capital flows and investor sentiment.

Heightened competition from banks, which are expanding into traditional NBFC segments.

A potential slowdown in the automotive sector, affecting vehicle financing demand.

Increasing fraud risks, which can undermine customer trust and disrupt operational efficiency.

Ashika Credit Capital Limited (ACCL) is a Non-Deposit Taking Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India (RBI) and classified as an Investment and Credit Company (NBFC-ICC). It is presently categorised as Middle Layer NBFC under the RBI Master Direction – Non-Banking Financial Company (Scale-Based Regulation) Directions, 2023.

Incorporated on 8th March, 1994 as a Private Limited Company under the Registrar of Companies, West Bengal, ACCL transitioned into a Public Limited Company on 3rd September, 1996. In 2000, the Company successfully floated its shares to the public and was subsequently listed on the Calcutta Stock Exchange. Since 2011, its shares were traded on the

BSE platform under the permitted securities category. Today, the Company is listed on the main board of BSE Ltd., underscoring its commitment to transparency, regulatory compliance, and strong governance.

ACCL is engaged in a diversified range of fund-based financial activities, including:

Investments in shares and securities, with a focus on special situation opportunities Long-term and short-term investments aligned with market opportunities Tactical and opportunistic investments to optimise returns Derivatives and algorithmic trading Inter-corporate and other structured lending solutions The Company also has a subsidiary, Ashika Private Equity Advisors Private Limited (formerly Ashika Entercon Private Limited), which is the investment manager for the proposed Ashika Private Equity Trust (APET). Approval for APETs registration as a Category II Alternative Investment Fund (AIF) is currently under process with SEBI. This initiative marks a strategic step towards expanding into the private equity and asset management space, further strengthening ACCLs vision of evolving into an integrated financial services platform.

The Company has only one segment, i.e. "Financial Services" and the entire revenue is generated from financial activities. Hence, there is only one segment reporting under Accounting Standards 17.

Total income for the year ended 31^st March, 2025 stood at 429.03 lakh, significantly lower compared to 1,854.74 lakh in the previous year.

The Company reported a loss before tax of 6,662.39 lakh in FY 2024-25, against a profit before tax of 1,276.14 lakh in FY 2023 24.

Tax expenses during the year were in the negative at 1,520.50 lakh, compared to positive 205.76 lakh in the previous year.

As a result, the net loss for the year was 5,141.89 lakh, compared to a profit of 1,070.38 lakh in FY 2023–24.

Consequently, the total comprehensive income for the year stood at a negative 5,142.24 lakh, against a positive 1,072.27 lakh in FY 2023 24.

Human resources remain central to achieving the Companys goals. Guided by the active involvement of the promoters and supported by the strategic insights of a diverse and capable Board, the Company continues to build a strong foundation for sustainable growth.

Our people are our greatest strength and the true drivers of our success. The Company has 17 permanent employees. We have put in place policies and practices that help us attract, retain, and nurture talent, even in an increasingly competitive landscape. The Company strives to foster a work culture that empowers employees, provides meaningful growth opportunities, and encourages excellence.

We also remain committed to the health, safety, and well-being of all employees and business associates, ensuring a secure and healthy work environment that supports productivity and engagement.

The Company has a strong and well-defined internal control framework, built on structured policies and procedures that are periodically reviewed and tested across all key processes and functions. Oversight is further strengthened by dedicated committees such as the Risk Management Committee and the Asset and Liability Committee, which monitor and evaluate critical aspects of operations.

Robust systems and processes ensure effective control mechanisms are in place. The Internal Audit and Compliance teams regularly assess adherence to internal policies, regulatory requirements, and legal obligations, providing timely feedback to the management for necessary corrective actions, including minimising any design risks.

The Audit Committee of the Board oversees the functioning of the audit and compliance processes, reviews the adequacy of controls, and ensures alignment with regulatory guidelines.

The Board and Senior Management are of the view that the Companys internal control systems are adequate and operating effectively, particularly in safeguarding financial reporting. These controls are designed to mitigate the risk of material misstatements in the financial statements and ensure any such risks are identified and addressed promptly

Risk management at ACCL is a structured process that helps identify and address potential challenges that could impact the Companys operations, objectives, revenues, or regulatory compliance. It involves reviewing business activities, recognising possible risks, assessing the likelihood of their occurrence, and taking timely, appropriate actions to mitigate them. By following a systematic approach, ACCL ensures that risks are managed proactively, allowing the Company to stay on course and achieve its stated goals even in uncertain environments.

ACCL has built a strong risk-aware culture that is deeply embedded across the organisation. At the governance level, the Board of Directors has constituted a Risk Management Committee (RMC) to oversee the Companys risk framework. The RMC helps the Board monitor and review key principles, policies, strategies, risk appetite, and the processes and controls in place to manage exposures effectively. The Companys risk landscape is diverse, and while the list is not exhaustive, some of the primary risks associated with the NBFC business include credit risk, market risk, interest rate risk, liquidity risk, operational risk, compliance and governance risks, and reputation risk. For each of these areas, ACCL regularly evaluates potential exposures and implements measures to minimise their impact.

ACCLs strong commitment to effective risk management practices has consistently helped the Company navigate complex and challenging business conditions, ensuring stability, resilience, and confidence for all stakeholders.

Some statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward looking or tentative within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied. Actual results may vary from such statements contained in this report due to various risks and uncertainties. The information contained herein is of the date referenced and the Company does not undertake any obligation to update these statements. ACCL has obtained all market or industry data and other information from sources believed to be reliable or through its internal estimates unless otherwise stated though its accuracy or completeness cannot be guaranteed. All information provided in this Report has been prepared solely by the Company and has not been independently verified by anyone else.