Avonmore Capital & Management Services Ltd Management Discussions

FORWARD LOOKING STATEMENTS

The statements in the "Management Discussion and Analysis Report" describe the Companys objectives, projections, expectations, estimates or forecasts which may be "forward- looking statements" within the meaning of the applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied therein due to risks and uncertainties. Important factors that could influence the Companys operations, inter alia, include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic, political developments within the country and other factors such as litigations and industrial relations.

Global Outlook

Global economic growth is projected to remain steady at 3.3% in both 2025 and 2026, lower than the pre-pandemic average of 3.7%. While this suggests some stability, the overall outlook remains uneven across regions, with persistent downside risks and policy challenges.

The United States continues to outperform expectations, supported by strong consumer demand, resilient labor markets, and improved financial conditions. Growth is projected at 2.7% in 2025, 0.5 percentage points higher than earlier estimates. In contrast, the Euro Area faces slower growth, projected at 1.0% in 2025, weighed down by weak manufacturing output, geopolitical tensions, and political uncertainty. A modest recovery to 1.4% is expected in 2026, driven by improved confidence and easing financial conditions.

Among emerging markets, India remains a bright spot, maintaining strong and stable growth at 6.5% for both years, reflecting robust domestic demand and structural momentum. China s growth is forecast at 4.6% in 2025, slightly up from earlier projections, helped by fiscal stimulus, although concerns persist around the property market and subdued consumption. Growth in other regions remains mixed. Latin America is expected to see a slight uptick in 2025 despite slowdowns in larger economies, while Saudi Arabia s forecast has been revised down due to extended oil production cuts. Sub-Saharan Africa shows gradual improvement, whereas emerging Europe may experience some slowing.

Global inflation is expected to decline to 4.2% in 2025 and 3.5% in 2026, although progress varies. Advanced economies are expected to return to target ranges faster, while inflation remains more persistent in some emerging markets. Core goods inflation has eased globally, but services inflation remains elevated, especially in the U.S. and Europe. As a result, central banks are proceeding cautiously with policy rate cuts. A few are even tightening rates, depending on inflation dynamics and currency movements.

The economic outlook is shaped by a complex mix of risks: Sticky inflation could delay monetary easing Trade tensions and geopolitical instability, particularly in the Middle East, add volatility

Political uncertainty and policy shifts in major economies are affecting investor confidence Trade volumes are expected to grow more slowly, due to rising trade policy uncertainty, though some of the impacts are expected to be temporary. Commodity prices, particularly oil, are projected to decline due to weak demand and strong non-OPEC supply, while food prices may rise due to adverse weather.

Indian Economic and Outlook

India s economy is poised for steady growth, with real GDP projected to expand by 6.3% in FY2025 26 and 6.4% in FY2026 27. This growth is underpinned by robust domestic demand, particularly rising private consumption, supported by higher real incomes, lower personal income taxes, and improvements in the labour market. Investment activity is also expected to remain strong, aided by declining interest rates and high public capital spending.

While domestic fundamentals remain solid, external challenges loom. The merchandise trade deficit has widened, though services exports and remittances continue to provide support. Higher US tariffs and growing trade policy uncertainty could weigh on export-oriented sectors like textiles, chemicals, and electronics. However, since exports constitute a modest share of India s GDP, the broader economic impact is expected to be contained.

Inflation is forecast to remain around 4%, well within the RBI s target band. Recent moderation in food and fuel prices, along with a balanced output gap, has helped ease price pressures. The RBI has started easing policy rates, with further cuts likely in 2025, creating a more supportive environment for growth.

The labour market remains resilient, with increasing participation and strong employment gains in IT, retail, and financial services. However, climate-related risks particularly the monsoon pose threats to rural incomes, inflation, and overall economic activity. The current account deficit remains manageable, and financial conditions are gradually improving.

The Union Budget 2025 26 charts a moderate fiscal consolidation path, aiming to reduce the central government deficit from 4.8% to 4.4% of GDP. Higher revenues from improved tax compliance and reduced subsidies are expected to create fiscal space while maintaining capital and defence spending.

While the near-term outlook is positive, structural reforms are essential to sustain long-term growth. Key priorities include: Rationalising subsidies and phasing out inefficient tax expenditures to free resources for public investment, social protection, and labour market initiatives.

Improving female labour force participation, which rose from 17.5% in FY2017 18 to 31.7% in FY2023 24. Further gains require better access to childcare, transport, skills training, and safe working environments.

Advancing trade liberalisation, including simplifying customs procedures and reducing tariffs, to boost competitiveness and encourage investment in tradable sectors.

Enhancing logistics and digital infrastructure, while reducing regulatory uncertainty, especially in tax administration, to strengthen the business environment.

Expanding access to long-term finance, including through capital market deepening and improved credit access for small and medium enterprises (SMEs).

Risks remain, particularly from climatic uncertainties, volatile global commodity prices, and trade tensions, especially with the United States. A weak monsoon could lead to higher food inflation and depress rural demand. On the external front, rising tariffs may dampen investor sentiment and reduce export growth.

On the upside, stronger remittance flows, better-than-expected infrastructure implementation, and investment inflows could lift growth beyond projections. Fiscal discipline, combined with reforms aimed at raising productivity and inclusion, will be crucial to realising India s full economic potential.

Source Internation Monetary Fund; OECD Economic Outlook

Industry Structure and Developments (Including Economic Overview)

FY 2024-25 was transformative for India s financial sector. Despite brief global disruptions, the Indian economy progressed with GDP growth above 7%. Domestic demand spanning consumption, private capex, and government infrastructure spending remained a key driver. The NBFC sector navigated evolving regulatory requirements including tighter RBI liquidity standards and SEBI compliance for listed entities while benefitting from an expanding credit market and heightened capital market activity. Avonmore, with its presence in fee-based advisory and lending, was also an indirect beneficiary of increased corporate capital raising and broader investor participation.

Avonmore actively communicated all required statutory information to the stock exchanges, including half-yearly financials, board-approved actions related to capital raising, and compliance updates. The company s disclosures consistently highlighted operational progress and prudent governance throughout the year.

Opportunities and Threats

Opportunities

Capex momentum nationwide provided mandates for Avonmore s investment banking and infra-consulting arms. An uptick in IPO, FPO, etc., placements, and financial advisory assignments strengthened fee revenues.

Advanced digital transformation across lending operations allowed for higher cost efficiency and enhanced risk analytics. Avonmore s near debt-free balance sheet empowered opportunistic growth, especially in market volatility.

Threats

Volatile capital market conditions in Q3 and global risk-off modes threatened both proprietary trading income and transaction volumes.

Increasing competition from fintech NBFCs and aggressively digital capital market players put pricing pressure on traditional services.

More stringent regulatory scrutiny and frequent changes in compliance norms (as reflected in regular exchange intimations) demanded heightened internal vigilance. Macro risks inflation, currency swings, and global rate hikes occasionally disrupted capital market sentiment and delayed large institutional deals.

Segment-wise or Product-wise Performance

Capital Market Services (via Almondz Global Securities)

Accounted for the majority of group revenue and profit, with key revenue drivers including equity and debt syndication, IPO/FPO management, and bespoke advisory.

Q2 and Q4 saw uptick in mandates, corresponding with peak equity market sentiment and successful government/private deals.

Lending

Continued slow and steady expansion, focused on secured mid-market lending.

Infra Consulting and Subsidiaries

Almondz Global Infra-Consultant Ltd. secured several new government and large private contracts, leveraging India s infra thrust.

Almondz Finanz extended credit and proprietary investments, consolidating as a 100%-held group subsidiary during the year.

Green Fuel and Ethanol

Premier Green Innovations Private Limited (PGIPL) contributed to Avonmore Capital s green fuel business and overall performance in FY 2024-25 in several ways: PGIPL operates a modern, grain-based distillery in Himachal Pradesh with an expanded capacity and a Zero Liquid Discharge (ZLD) system, underscoring its commitment to clean and sustainable manufacturing. This supports Avonmore s green fuel portfolio by supplying high-quality grain ENA, ethanol, and other alcohol products.

The company is setting up a dedicated 200 KLPD ethanol plant, enhancing Avonmore s capacity to supply ethanol for blending with conventional fuels. This aligns with government targets for greener fuel solutions and supports Avonmore s goal to expand in the clean energy segment.

? PGIPL is pursuing a new Greenfield project in Odisha to further increase ethanol supply and contribute to national blending mandates, reinforcing Avonmore s positioning in the green fuel industry.

The company is certified with international standards (FSSC

22000 and ISO TS 22002-1:2009) and emphasizes eco-friendly production and technological advancement, which helps Avonmore deliver quality, compliant, and sustainable products.

Through operational excellence, forward integration in bottling, and expansion plans, PGIPL has strengthened Avonmore s performance by enabling access to new markets and improving customer satisfaction in the green fuel and beverage sectors.

Overall, PGIPL s initiatives and investments have played a pivotal role in enhancing Avonmore Capital s capacity, reputation, and growth in the green fuel business, significantly contributing to the group s sustainability strategy and operational performance for FY 2024-25.

Other Businesses

Contributions from real estate and apparel subsidiaries were nominal; however, these platforms are maintained for long-term strategic flexibility.

Outlook (Business Outlook FY 2025-26)

Avonmore is well-positioned for the coming fiscal year due to: Further anticipated market deepening and revival of IPO/NCD cycles.

Positive fallout from India s infrastructure mission and digital economic acceleration, giving tailwinds to both lending and advisory businesses.

Additional capital raising proposal through the preferential issue of warrants, further enhancing growth headroom. Continued focus on digitizing customer acquisition and internal controls to drive both reach and regulatory compliance. The group expects to defend profit margins and grow market share, provided external disruptions remain moderate and regulatory clarity persists.

Risks and Concerns

Market Risk:High dependence on capital markets means proprietary and advisory income is vulnerable to sharp corrections or liquidity freezes. The risk management team remains vigilant with daily monitoring and scenario planning, as noted in regular board updates.

Regulatory Risk:Ongoing compliance with RBI/SEBI directions including exchange reporting, capital requirements, and disclosure norms requires continuous investment in systems and staff training.

Credit Risk:Lending books are closely watched for asset quality, with risk-adjusted pricing and strict collateralization as key mitigants.

Operational Risk:Risks of fraud or lapses in internal controls are countered by digital audit trails, robust IT infrastructure, and frequent external/internal audits.

Internal Controls, Risk Management, and IFC

Avonmore s Board and executive management have institutionalized risk management framework, as internal control Comunserating with size of Company.

The company regularly tests and upgrades its Internal Financial Control (IFC) processes, with annual independent audits and certification.

Key material events, changes in financials, and governance matters are shared with exchanges, adhering to regulatory requirements and promoting transparency.

Automation, real-time compliance monitoring, and board-level oversight constitute the backbone of the company s effective risk management architecture.

Discussion on Financial Performance with Respect to Operational Performance

Revenue:For FY25, Avonmore recorded consolidated revenue of ? 181.56 crore, powered by an upswing in capital market mandates (Q2 and Q4), lending revenue, and new infra-consulting contracts.

Profitability:Profit after Tax stood at ? 37.58 crore supported by cost containment, process automation, and higher-yielding mandates.

Cash Generation:Free cash flows improved, as collection efficiency stayed high and working capital cycles shortened. Balance Sheet:The group ended the year nearly debt-free, with a total asset base of ? 580 crore and strengthened net worth due to retained earnings and a successful capital-raising program.

Material Developments in Human Resources / Industrial Relations

Consolidated Headcount increased to 250+ by March 2025, driven by expansion in advisory, infra-consulting, and technology teams.

No industrial disputes were reported; employee morale and retention metrics remained robust, attributed to pay-for-performance policies, ESOP expansion, and upskilling initiatives.

Disclosures on appointments, retirements, and key HR actions were periodically communicated to exchanges, reinforcing a culture of transparency and accountability.

Emphasis on diversity, digital upskilling, and staff wellness continued, supporting the group s drive for operational excellence.

Progressive HR policies including flexible work arrangements and leadership development were rolled out and discussed in internal reviews and exchange filings.

KEY FINANCIAL RATIOS

(Amount in Lakhs)

Key Ratios/Industry Specific Ratios	2024-25	2023-24
Debtors Turnover (No. of days)	118	237
Operating Profit Margin (%)	90.34%	78.13%
Return on Net Worth (%)	6.17%	5.83%

RISK MANAGEMENT

Your Company is exposed to various risks that are an inherent part of any financial service business.

Risk management framework

Risk	Measurement	Risk management
Credit risk	Credit limit and ageing analysis	Highly rated bank deposits and diversification of asset base and collaterals taken for assets
Liquidity risk	Cash flow forecasts	Committed borrowing and other credit facilities and sale of loan assets (whenever required)
Market risk - interest rate	Sensitivity analysis	Review of cost of funds and pricing disbursement

COMPLIANCE

An independent and comprehensive compliance structure addresses the Company s compliance and reputation risks. All key subsidiaries of the Company have an independent compliance function. The Compliance officials across the Group interact on various issues including the best practices followed by the respective companies. The Company uses the knowledge management system for monitoring new and changes in existing regulations. The Company also looks at regulatory websites and participates in industry working groups that discuss evolving regulatory requirements. Training on compliance matters is imparted to employees on an ongoing basis.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has a proper and adequate system of internal control in all spheres of its activities which is commensurate with the size, scale and complexity of its operations. The Internal Auditors monitor the efficiency and efficacy of the internal control systems in the Company, compliance with operating systems/ accounting procedures and policies of the Company. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. The Company has adequate systems and procedures to provide assurance of recording transactions in all material respects. The Company conducts its internal audit and compliance functions within the parameters of regulatory framework which is well commensurate with the size, scale and complexity of operations. The internal controls and compliance functions are installed, evolved, reviewed, and upgraded periodically. Moreover, ACMS continuously upgrades these systems in line with the best available practices. The Audit Committee reviews the performance of the audit and compliance functions, the effectiveness of controls and compliance with regulatory guidelines and gives such directions to the Management as necessary / considered appropriate. Internal Audit Reports are discussed with the Management and are reviewed by the Audit Committee of the Board which also reviews the adequacy and effectiveness of the internal controls in the Company. The established Internal Control Systems of your company are adequate to ensure that all the activities are monitored and controlled against any misuse or misappropriation of asset and that the transactions are authorized, recorded and reported correctly.

HUMAN RESOURCE

The Company is having dedicated employees who help the Company in achieving its goals. People remain the most valuable asset of your Company. Your Company is professionally managed with senior management personnel having rich experience and long tenure with the Company. It follows a policy of building strong teams of talented professionals. It also encourages, appreciates and facilitates long term careers. Your Company continues to build on its capabilities in getting the right talent to support different products and geographies and is taking effective steps to retain the talent. ACMS is committed in helping its people gain varied experiences, accomplish challenging assignments, learn continuously and build their careers.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis of Financial Conditions describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. The Company assumes no responsibility to publicly amend, modify or revise forward-looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include changes in government/ regulatory regulations, tax laws, economic developments within the country and such other factors.