CARE Ratings Ltd Management Discussions

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CARE Ratings Ltd (CareEdge Ratings or the Company) is Indias second-largest rating agency, with a credible track record of rating companies across diverse sectors and a strong position across the segments. The Company was established in 1993, and by then, it had built a strong reputation and trust in the credit rating industry. With over 3 decades of deep domain expertise and a robust analytical framework, CareEdge Ratings offers ratings that help lenders and investors make informed decisions.

Over the years, CareEdge Ratings has expanded its services beyond traditional credit ratings to ESG ratings, research, risk assessment, and advisory services. The Company serves a diverse set of clients from various industries such as manufacturing, infrastructure, and the financial sector, which includes banking and non-financial services, both in India and abroad.

Driven by a commitment to transparency and quality- led growth, CareEdge Ratings aims to be a knowledgecentric brand through publishing data-driven insights on the Indian and global economy, and industry research papers regularly. It continues to play a pivotal role in strengthening market confidence and supporting the development of Indias financial ecosystem.

FY2025 was an important year for the CareEdge Group. It showed that the Companys strong foundation and the steps it has taken to grow are working well. Throughout the year, the Company made bold and confident moves to reach its long-term goals. Every action was taken with a clear plan and strong sense of purpose, helping the Company stay on the path to success. The Companys approach has been very effective and helped them achieve several important milestones. A firm belief in its strengths and capabilities and a dedication to excellence significantly contributed to these accomplishments.

On the international stage, CareEdge expanded its presence, especially in Africa and Nepal. It also launched CareEdge Global, marking its entry into Sovereign and Global Scale Ratings, an important step forward. The growth of the company is built on three main pillars: Technology, People, and Group Synergy. These continue to guide and support its progress as it faces challenges in the global market. With its mission firmly in focus, CareEdge is ready to achieve even more in the coming year.

In recent times, the Company restructured its Business Development (BD) team from a region-based model to a verticalised and industry-focused approach. This strategic shift allowed for more efficient use of resources and contributed to consistent growth in new business acquisitions throughout FY 2025. The Companys efforts to expand its geographical reach also paid off, resulting in an increase in new rating market share by count and reinforcing its position as the leading credit rating agency.

The Company on-boarded significantly large number of new clients rated in the "A” category and above during FY 2025, which is aligned with its Quality Led Growth strategy. Its focused initiatives in the capital market helped boost market share in both public and private placement issuances. The securitisation segment experienced robust growth, with a 55% rise in rated volumes compared to FY 2024.

In FY 2025, SEBI introduced a new mandate for rating agencies to monitor the use of equity issuance proceeds by corporates. The Company quickly established itself as the market leader in this area. Committed to building a knowledge-centric brand, the Company continued to provide valuable insights through monthly newsletters covering the infrastructure and BFSI sectors, along with its publication ‘Foresights.

The Ratings vertical showed a strong performance this year, which is marked by excellent analysis, timely execution, thought leadership, and increased use of technology. The team delivered reliable ratings with the lowest default rates in the industry and took quick and well-informed actions when needed, which helped the Company earn trust from several investors and clients. The Company efficiently handled significantly large number of rating assignments by meeting all deadlines and compliance requirements without delays. The team actively shared insights through more than 30 webinars and conferences, over 80 opinion pieces, and continued publishing their well-received monthly magazine "Foresights”.

Technology and automation played a key role in achieving excellence in the companys operations. Efforts are being made to integrate artificial intelligence (AI) and machine learning (ML) to improve workflows for better accuracy and efficiency. Despite global economic challenges, the team remains confident about maintaining high performance by focusing on strong processes, deeper investor engagement, and continued innovation.

In FY 2025, CareEdge not only continued its branding efforts but also took them to the next level. The Company increased its visibility through focused, high- quality outreach and a stronger presence in the media. The brand presence of the Company was strengthened through a range of outreach activities and industry engagement forums. Its flagship event series, "CareEdge Conversations” which was held in Mumbai and Pune, featured prominent thought leaders and experts. Our sector-focused roundtables, "CareEdge Charcha” and events focussed on Global debt issuances "CareEdge Dialogues”, along with numerous knowledge-sharing forums, facilitated meaningful dialogue, reinforcing our leadership in the industry.

In FY 2025, CareEdge hosted over 30 webinars and conferences and participated in 127 Knowledge Sharing

Forums where experts spoke and shared knowledge. The Company also produced valuable content such as knowledge papers, thematic reports, and regular updates. CareEdge partnered with well-known media and industry platforms to boost its influence. These included the ET MSME Awards, Business Standard MSME Awards, Free Press Journals Best Annual Report Awards, and events by groups like Assocham (such as the 16th Mutual Fund Summit) and the Global Real Estate Brand Awards 2024. Moreover, CareEdge also continued to build strong relationships with the financial community through active investor relations that helped keep stakeholders informed and engaged throughout the year.

FY 2025 marks the 10th Anniversary of CareEdge Africa, a significant milestone that underscores CareEdge Groups long term commitment to fostering trust, integrity, and transparency in the financial ecosystem of Mauritius and Africa.

CareEdge Africa continued its impressive performance during the financial year. In FY 2025, CareEdge Africa assigned ratings to bank facilities and bond issues aggregating to USD 3 billion (USD 2.4 billion in FY24), translating to a 25% higher debt rating in FY25 (vis-avis FY24). Accordingly, CareEdge Africas revenue from operations grew by 48% in FY25 (32% in FY24), and PBT grew by 81% in FY25 (12% in FY24)

In FY 2025, CareEdge Nepal focused on important goals like getting and keeping customers, improving efficiency, using more digital tools, offering new services, building strong partnerships, and showing solid leadership. Despite challenges such as limited bank approvals due to rising non-performing loans (NPLs), tough competition, and low awareness of credit ratings in Nepals market, the Company still made good progress. It carried out outreach programs to raise awareness, held knowledge-sharing sessions with financial institutions, actively worked with regulators and industry leaders, and launched its flagship event, "CareEdge Conversations" which encouraged meaningful talks with clients, bankers, and stakeholders.

These efforts led to a 26% increase in revenue and a 16% growth in profitability during FY 2025. CareEdge Nepal also became the market leader in the country, holding the highest market share in both new ratings and ongoing

rating reviews. The Company also made progress in digital transformation by using platforms like Ci3, improved its presence in the media, and focused on growing its team through structured training programs. This helped build leadership skills and maintain low employee turnover.

Looking ahead, CareEdge Nepal plans to expand its market reach, improve how it connects with customers, and continue investing in its team and leadership development. These steps are aimed at increasing client satisfaction, strengthening the brand, and boosting profitability for future growth.

CareEdge Analytics is a key player in risk analytics and consulting, offering advanced solutions to banks and financial institutions. With over 18 years of experience, the Company provides modern risk management through its Al-powered platform "EdgeAvira.ai”. All new products are now part of this platform, which shows the strong focus on innovation and complete risk intelligence.

CareEdge Analytics has successfully completed more than 100 projects in India, Sri Lanka, and Bhutan, earning a solid reputation in the banking industry. As a fully owned subsidiary of CARE Ratings Limited, CareEdge Analytics benefits from the strength and expertise of its parent Company, which helps enhance its analytics capabilities and grow its reach.

In the last year, CareEdge Analytics went through a major transformation, reshaping itself as a FinTech company under the CareEdge brand. With deep knowledge in credit risk, CareEdge Analytics is now firmly positioned in the Credit Tech space. While continuing to explore the large potential of the Indian market, it is also expanding its presence in the Middle East and Africa. It shows the constant focus on innovation and a strong understanding of risk and compliance, CareEdge Analytics remains committed to shaping the future of financial analytics.

CareEdge Advisory is on a mission to become a trusted, knowledge-driven partner that helps clients make superior decisions through strong sector insights and advanced analytics. Its main service areas include industry research, corporate advisory, and ESG advisory. These teams support clients with specialised research, investment advice, asset monetisation, strategic planning, analytical assessments, peer benchmarking, TEV studies, business valuations, grading services, and ESG consulting.

CareEdge Advisory aims to expand these services even further, building on the experience and variety of projects it has already handled. This experience has added depth to its capabilities and given it a competitive edge in the markets it serves. CareEdge Advisory regularly shares its

knowledge and viewpoints through social media posts, opinion articles, and other content, helping build its brand and reputation as a thought leader.

Looking ahead, CareEdge Advisory expects to grow across all its business lines. This growth is likely to be supported by broader economic development, government initiatives like infrastructure expansion, the Viksit Bharat vision, and Indias progress toward Net Zero. To stay ahead, CareEdge Advisory continues to invest in people, skills, and technology to remain competitive and meet the evolving needs of the industry.

Future plans also include taking on more complex projects, expanding into new customer segments, and deepening expertise and service quality. Strategic partnerships have been important in the past and will continue to play a key role in offering end-to-end solutions. Additionally, CareEdge Advisory plans to expand into other countries where the CareEdge Group operates. Thought leadership and brand building will remain central to its outreach strategy through articles, webinars, seminars, and expert opinions.

In FY 2025, the Company made important progress in the Environmental, Social and Governance (ESG) space, which highlights its growing importance to investors, stakeholders and regulators. CARE ESG Ratings Limited (CareEdge ESG) leads this effort as a fully owned subsidiary of The Company, licensed by SEBI and officially registered as a Category "I” ESG Rating Provider under the Issuer Pays model.

CareEdge ESG developed a detailed and structured methodology for conducting ESG assessments, which is reviewed and validated by an external rating committee. This process ensures the quality, reliability, and transparency of the ESG ratings provided. The team has

also been proactive in engaging with clients, highlighting its unique approach and the value it brings to their sustainability goals.

A major milestone was achieved with the assignment of the first ESG rating to ESAF Small Finance Bank by CareEdge ESG. This marked a significant step and showed its ability to provide credible, high-quality ESG ratings. As CareEdge ESG continues to grow its ESG services, it remains committed to helping clients meet their sustainability objectives and delivering lasting value to all stakeholders.

In October 2024, The Company took a major step into the international market by launching CareEdge Global IFSC Limited (CareEdge Global), which is a wholly owned subsidiary focused on Global Scale Ratings. This move came after more than 30 years of experience in Indias debt markets, and CareEdge Global was also officially licensed by the International Financial Services Centres Authority (IFSCA) to provide global-scale and sovereign ratings.

CareEdge Global is proud to be the first Indian credit rating agency to enter the global credit rating space. It brings a fresh and credible option to the highly concentrated international ratings market by building on a strong foundation of transparency, consistency, a localised approach, and authenticity.

Since its launch, CareEdge Global has already assigned global scale ratings to seven companies for their international bond issues, with a combined value of USD 2 billion. The agency received its IFSCA license at GIFT City, which acts as a unified financial regulator. The CareEdge Global team has been actively engaging with issuers and investors to promote its unique value proposition. The Company is expected to play a key role in expanding the CareEdge Groups global presence and driving future growth.

The majority of the Directors in CareEdge Ratings Board of Directors are independent Directors who bring with them rich experience in finance, economics, regulatory affairs, information technology, and the insurance industry. This provides advanced guidance to management for making innovative decisions.

CareEdge Ratings has implemented an internal control framework to ensure all assets are safeguarded and protected against loss from unauthorised use or disposition, and transactions are authorised, recorded, and reported correctly. The framework includes internal controls over financial reporting, which ensures the integrity of the financial statements of the Company and reduces the possibility of fraud.

The Internal Controls and Criteria Team issues well- documented operating procedures and authorisations with adequate built-in controls. These are carried out at the beginning of any activity and throughout the process to keep track of any major changes. As part of the controls process, they also review the design of key processes, from the point of view of the adequacy of controls. The independent internal auditors also conduct an exhaustive internal audit of the operations and procedures adopted by the company in accordance with SEBIs guidelines. The Companys statutory auditors have audited the financial statements and issued a report on your Companys internal control over financial reporting as defined in Section 143 of the Companies Act, 2013 (the Act). The said report is annexed to the independent auditors report.

CareEdge Ratings has been actively engaging with the regulators on various aspects and has also been at the forefront in meetings of various industry bodies like the Association of Indian Rating Agencies (AIRA). In FY25, SEBI issued circulars to introduce measures for ‘Ease of doing business, to identify scenarios of non-payment of debt due to reasons beyond the control of the issuer, enabling CRAs to undertake rating activities in the International Financial Services Centre - Gujarat International Finance Tech-city and issued ‘Cyber security and resilience framework for SEBI regulated entities These initiatives opened opportunities and redefined the functioning of market intermediaries. The various measures initiated are aimed at enhancing the standards of the credit rating industry. CareEdge Ratings has instituted robust systems and processes to ensure compliance with all regulatory requirements. Your company is committed to upholding the highest standards to ensure regulatory compliance.

In FY 2025, CareEdge continued to strengthen operational efficiency and drive innovation within its regulated ratings business by embracing new technologies and data advancements. Recognizing the fast-changing digital landscape, the Company focused on using modern tools to improve productivity and service quality.

Its Machine Learning (ML) models, designed to extract financial and operational data from public corporate filings, were upgraded to handle more document formats with greater accuracy and better contextual understanding. These improvements, combined with continuous model training, led to higher data quality, which in turn enhanced analyst productivity and reduced turnaround times.

Following the launch of its new website, CareEdge further upgraded its features to comply with regulatory requirements and introduced websites for its subsidiary companies, ensuring consistent branding across the group. Business tools used by the ratings team were also enhanced, especially in the creation of rating letters, press releases, and regulatory reports, which are boosting overall efficiency.

The Company also completed a smooth document migration process, laying the foundation for its next- generation rating platform. This new platform is being developed with a technology partner and uses secure, scalable cloud-native systems along with advanced AI and ML capabilities. A phased rollout of key features began with internal testing.

To improve the sales process, CareEdge implemented a customer relationship management (CRM) system, launching modules for customer onboarding, opportunity tracking, and proposal management. Phase 2 of this system will introduce more sales tools and analytics to support better decision-making.

Additionally, CareEdge rolled out a cloud-based expense management system to track and analyse the companys spending more effectively. To ensure high-quality and compliant press releases, the Company developed an internal tool using ML and Natural Language Processing (NLP), further boosting consistency and efficiency in communication.

The focus on creating a vibrant and rewarding workplace has played a key role in CareEdges ongoing success. In FY 2025, the Company remained committed to attracting and retaining top talent across all levels, right from senior leaders to young professionals who are just beginning their careers. The Company places great importance on recognizing and celebrating employee contributions, understanding that its people are central to its achievements.

To build a lively and engaging work culture, CareEdge regularly organised social events and educational webinars that help to uplift both the community and continuous learning. Its HR policies were updated to reflect the latest industry standards, helping to position the Company as a preferred employer for skilled professionals.

The Companys strong commitment to employee wellbeing and growth is reflected in its steadily decreasing attrition rates over the past two years. Additionally, significant improvements in employee engagement and the Employee Net Promoter Score highlight the success of its efforts to create a supportive, positive, and high- performance work environment as it heads into FY 2026.

In accordance with relevant securities laws and regulations, comments in the Management Discussion and Analysis that describe the Companys goals, plans, estimates, or expectations may be deemed to be "forward-looking statements." Actual outcomes could significantly vary from those that were stated or indicated.

Economic conditions affecting supply and demand, price conditions in domestic and international markets where the Company operates, competitive pressures in these markets, changes in governmental regulations, tax laws and other statutes, as well as incidental factors, are significant variables that could have an impact on results.