Avon Mercantile Ltd Management Discussions

This section includes a discussion on the following matters within the limits set by the Companys competitive position, in terms of Part B of Schedule V read with Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:

(a) Industry Structure and Developments

Avon Mercantile Limited is registered with the Reserve Bank of India as a Non-Banking Financial Company under Section 45-IA of the Reserve Bank of India Act, 1934, and is classified as a Base Layer NBFC (NBFC-BL) under the RBIs Scale-Based Regulation framework.

In terms of its Memorandum of Association, the Company is authorized to carry on the business of a financier — including inter-corporate deposits and bridge loans — as well as the business of an investment company. In keeping with these objects, the funds of the Company are presently deployed in loans, investments and bank fixed deposits, with its core activities centered on inter-corporate deposits and short-term loans and advances to its group companies.

The Indian NBFC sector continues to play a significant role in extending credit to segments underserved by the banking system. Companies such as Avon Mercantile Limited, being closely-held and group- focused in their lending and investment activities, operate on a considerably smaller and more contained scale. As at 31st March, 2026, the total asset size of the Company stood at ^4,570.66 lakhs.

(b) Opportunities and Threats

- Opportunities

As a Base Layer NBFC, the Company benefits from a lighter regulatory and compliance framework compared to Middle and Upper Layer NBFCs, allowing for cost-efficient operations.

The Companys objects as a loan company provide scope to deploy surplus funds across intercorporate deposits, short-term loans and investments, depending on requirements.

Demand for short-term inter-corporate funding.

- Threats

Any tightening of RBIs regulatory norms applicable to Base Layer NBFCs could increase compliance requirements going forward.

Interest rate fluctuations may affect the yield on loans, deposits and investments.

Limited scale restricts the Companys ability to diversify into a broader NBFC-ICC lending base.

(c) Segment-wise or Product-wise Performance

As a Base Layer NBFC, the Company operates in a single reportable segment, namely financing and investment activities, comprising inter-corporate deposits, short-term loans and advances, and investment of surplus funds. Accordingly, no separate segment-wise disclosure is applicable, and performance is discussed on an aggregate basis.

During the financial year ended 31st March, 2026, the Company earned Revenue from Operations of Rs. 21 lakhs and Other Income of Rs. lakhs, aggregating to a Total Income of Rs. 2 lakhs. The Company recorded a Profit After Tax of ^91.62 lakhs for the year, as against a loss of Rs. lakhs in the previous financial year, reflecting a turnaround in operational performance driven primarily by income from its core lending and investment activities.

(d) Outlook

Having recorded a Profit After Tax of Rs. 2 lakhs for the financial year ended 31st March, 2026, as against a loss of Rs. lakhs in the previous financial year, the Companys financial position has shown a marked improvement. The management expects to sustain this positive trend by continuing its focus on inter-corporate deposits, short-term lending and prudent deployment of surplus funds among its group companies, while maintaining a cautious approach given the Companys limited scale of operations as a Base Layer NBFC.

(e) Risks and Concerns

The Companys key risks include concentration risk (lending largely confined to group companies), credit risk of delay or default in repayment, interest rate risk affecting yields, liquidity risk given its limited asset base as a Base Layer NBFC, and regulatory risk from changes in RBI or SEBI norms.

(f) Internal Control Systems and their Adequacy

During the year under review, Company has an internal control system in place and was periodically reviewed for effectiveness.

(g) Discussion on Financial Performance with Respect to Operational Performance

Financial performance has been given separately in the Directors Report.

(h) Material Developments in Human Resources / Industrial Relations, including number of people employed

The Company, being a Base Layer NBFC with operations confined to loan activities, does not have an industrial workforce, and accordingly there were no industrial relations matters during the year under review. As on 31st March, 2026, the Company had 3 (Three) employees, comprising its Key Managerial Personnel.

During the year, there were changes in the Companys Key Managerial Personnel, including in the positions of Chief Financial Officer, Company Secretary, and Manager, details of which are set out in Directors Report.

(i) Details of Significant Changes (25% or more vs. the immediately preceding Financial Year) in Key Financial Ratios

(j) Details of any Change in Return on Net Worth as Compared to the Immediately Preceding Financial Year

2. Disclosure of Accounting Treatment

(Required only where, in the preparation of financial statements, a treatment different from that prescribed in an Accounting Standard has been followed, together with managements explanation as to why the alternative treatment better represents a true and fair view of the underlying business transaction.)

In the preparation of the financial statements for the year under review, the Company has followed the treatment prescribed under the applicable Accounting Standards, and there has been no deviation from any Accounting Standard prescribed under the Companies Act, 2013.