Centrum Capital Ltd Management Discussions

Global Economic Overview

In 2023, the global economy demonstrated strength despite unpredictable challenges, driven by fluctuating commodity prices that led to high inflation. These issues were compounded by ongoing geopolitical tensions between Ukraine and Russia, and more recently, between Israel and Palestine, resulting in disruptions to supply chains. To mitigate inflation, Central Banks in major economies resorted to interest rate hikes which impacted economic activity.

As a result, the International Monetary Fund (IMF) estimates global growth to decrease from 3.5% in 2022 to 3.1% in 2023.¹ Despite these hurdles, emerging economies like India, Vietnam and Mexico experienced positive growth and attracted investments from foreign institutional investors. However, Chinas economy exhibited signs of strain, which could have adverse effects on the global economy.

Growth projection by World Economic Outlook

Outlook

In FY 2025, the world economy will be at an inflection point, with chances of measured growth. Even amidst geopolitical tensions, a cautious optimism prevails. Besides, decreasing inflationary pressures are expected to induce Central Banks into implementing more supportive fiscal policies.

However, it is crucial for governments and international organisations to tackle urgent issues like debt relief, climate change and global trade. The combined efforts of governments and the strength of economies around the world will play a key role in creating a path for sustainable and inclusive growth in the days ahead.

Indian Economic Overview

Indias economy has demonstrated a strong growth trajectory, driven by several positive reforms. The countrys young and growing population, the robust performance of its manufacturing sector and steady growth of financial markets continue to attract investments.

For FY 2024, growth is expected to be moderate. Real GDP growth is expected to reach 6.8% in fiscal year 2025. Regulatory measures aimed at curbing unsecured lending may impact credit growth. Looking ahead, India aims to surpass the $5 trillion mark and achieve the target of becoming a $7 trillion economy within the next

Outlook³

The Indian economy is poised for sustained growth in the years ahead, driven by robust domestic demand, strategic policy initiatives and significant structural reforms. The recently announced Interim Union Budget for 2024-25 aims to bolster economic progress by prioritising capital expenditure, enhancing infrastructure development and fostering inclusive growth.

Looking ahead, the governments focus is expected to shift from large-scale projects to strategic investments. This transition will be supported by well-crafted policies, evolving global trade dynamics and a commitment to green energy adoption.

Company Overview

Founded in 1997, Centrum Capital Limited ("Centrum") is a well-respected financial services group with diversified fee businesses, a growing lending platform and a Small Finance Bank. The Group caters to institutions and individual clients and has a PAN India presence. Institutional services include Investment Banking and an Institutional Broking Desk catering to FIIs, pension funds, Indian mutual funds, domestic institutions and HNIs. Centrum provides Comprehensive Wealth services to HNIs and family offices, along with affordable Housing Finance in Tier II and Tier III cities. The Alternative Investment Management business manages funds across private debt and venture capital. Unity Small Finance Bank Limited (Unity Bank) is a new-age, digital-first bank that offers a

Fee Businesses

INVESTMENT BANKING

Industry Overview

The investment banking sector in India is anticipated to witness growth in 2024. The sector is expected to benefit from improved economic activity, stable government policies, technological progress and digital transformation drives across the country. Financial stability and structural reforms are also anticipated to add impetus. Despite global economic uncertainties and challenges associated with potential changes in interest rates and competition from FinTech players, the industry is poised for sustained progress. ⁴

In the first quarter of 2024, global Initial Public Offering (IPO) volumes experienced a 7% ⁵ decrease, however, the proceeds saw a year-on-year increase of 7%. Amidst a global slowdown in IPO activity, India emerged as a standout performer. Despite a 15.8% decline in the total number of IPOs worldwide (reaching 1,429), India secured an impressive third position in terms of IPO proceeds.⁶ This achievement underscores a significant shift in the sources of capital, with Indias local markets maturing and attracting substantial investment. The investment banking sector in India has become a notable global participant. This development is fuelled by the countrys strong economic progress and an increasing demand for corporate finance services. Indias market capitalisation stands at H 39,989,013 crore, as on March, 2024⁷.

Data compiled on January 25, 2024 Analysis includes all IPOs completed on the National Stock Exchange of India Limited and BSE Limited covered by S&P Global Market Intelligence.

(Source: S&P Global Market Intelligence_Jan, 252024)⁸

Business Overview

Centrums Investment Banking team caters to the growth funding requirement throughout the life cycle of a corporate. The range of specialist services cover Equity Capital Markets (ECM), Corporate Finance (Private Equity and M&A) and Debt Capital Markets, with dedicated teams for key sectors. As a category I Merchant Banker, core services include IPOs, Qualified Institutional Placements (QIPs), Delisting, Rights Issuance, Open Offers, Buybacks and other ECM Products. Additionally, the business offers private placement of primary & secondary equity, mezzanine debt, mergers and acquisitions, advisory and advisory services on restructuring. The vertical also handles debt syndication for all types of loans, stressed asset solutions, securitisation and portfolio sale. The Infrastructure Advisory Group is focused on Transaction Advisory and Corporate finance deals in the areas of renewable and conventional energy, roads, railways, ports, urban infrastructure, airports, utilities, mobility and logistics.

Highlights FY2024

Optimism prevailed in the capital markets during the year. Some of the major reasons were:

1. Indias macroeconomic stability was parallel to none.

2. The fiscal deficit was steadily shrinking as a proportion of gross domestic product.

3. The rupee was stable and probably the best performing currency in the Asia PAC region.

4. "Core" inflation, which excludes food and fuel prices, had eased to 3.3 per cent year-on-year.

Equity Capital Markets and Corporate Finance

During the year, the Equity Capital Markets (ECM) and Corporate Finance teams worked on multiple transactions with marquee clients, many of which are ongoing:

Closed Transactions

Book Running Lead Manager

1. IPO of JG Chemicals Limited (Left Lead): The issue was oversubscribed ~28.5 times generating a demand of ~H 57 bn.

2. IPO of Popular Vehicles & Services Limited: With an issue size of H 6 bn + in spite of extreme volatility in the small and mid-caps space during the issue open dates, the issue was oversubscribed across QIB, Retail and Employee investor categories.

Lead Manager and Advisor

3. QIP of Axiscades Technologies Limited: The QIP which was offered at a price of H 662 per share was the first QIP raise post Axiscades IPO and was oversubscribed with a demand of ~8x of the issue size. The investors who received allotments, are a healthy mix of mutual funds, insurance companies, FPIs and AIFs.

4. Buyback of Shares of Dhampur Sugar Mills Limited: Manager to the Buyback offer made by the company. The offer was oversubscribed with a demand of ~7.4x of the issue size.

5. Open Offer of Camlin Fine Sciences Limited: Manager and Advisor to the issue. The Offer was made by funds advised by Convergent Finance LLP and a subsidiary of Belgium based Ackermans & van Haaren.

6. Rights Issue of Goa Carbon Limited: Lead Manager for the proposed Rights Issue of shares to the existing eligible shareholders of the Company.

7. Scheme of Arrangement of Dhampur Sugar Mills Limited: Sole Advisor to the scheme of arrangement.

8. Corporate Restructuring of Rane Group: Provided a fairness opinion on the merger of Rane Engine Valves Limited with Rane (Madras) Limited.

9. Pre-IPO Placement in SBI General Insurance (SBI GI): Sole Transaction Advisor to Elpro International Limited, large family offices and Ultra High Networth Individuals to facilitate an investment of ~ H 1.25 bn in SBI General Insurance shares sold by ESOP holders. The team has thus far facilitated investment by 40 Institutional and Individual investors in SBI GI shares, aggregating over H 6 bn.

Infrastructure Advisory

Infrastructure Advisory team has successfully advised 100% forward sale of an under development road project for consideration of ~ H 150 Crs to a global investment platform. The team has also closed a uniquely structured deal raising H 275 Crs from

one of the leading AIFs for a reputed road EPC company to execute an under development highways project. Centrum was the exclusive advisor in both the deals.

Debt Capital Markets

With the fast-paced recovery of economic activity in India in FY2024, the Corporate sector was on the front foot to plan growth and expansion. Many stressed borrowers were also encouraged to seek solutions and resolutions to their problems. In spite of the RBI maintaining a high REPO rate to tame inflation, it did not deter the demand for credit for growth, refinancing or special situations.

The Debt Capital Markets (DCM) team worked closely with the Private and PSU Banks, NBFCs, AIFs and Credit funds to close several mandates in restructuring, growth financing, refinancing and special situations. Key transactions include:

• Steel Exchange India Limited (Refinancing and additional funding of H 375 crs)

• K C Montessori Education Society (Project Loan H 100 crs)

• Arunachal Pradesh Power Corporation Limited. (Working Capital H 75 crs)

• Apollo Green Energy Limited. (Working Capital H 31 crs)

• OPG Power Generation Private Limited (Refinancing of existing loans H 30 crs)

Outlook

The business aspires to be a credible and sought-after mid-market investment bank, offering customised financial solutions. It aims to prioritise sectors and develop internal synergies within the Group. With the country being "future ready" poised to drive global growth, the team expects to serve a wider clientele with higher volumes of business in the coming years. The Infrastructure Advisory practise expects strong tailwinds for the sector, enabled by the relentless efforts of the Government to create world class infrastructure and transition to green energy complemented by sustained appetite of the global investors for long term assets in India. Embracing new technologies will open up many untapped opportunities for the business which aims to cater to a wider set of clients in new age sectors such as electric vehicle ecosystem, green hydrogen and digital infrastructure. Building upon the traction gained over the last few years, the business targets to be a leading mid-market investment banker in the entire spectrum of infrastructure and allied sectors.

Each of the verticals has a strong deal pipeline in place and expects to close several transactions in FY2025.

On-going Transactions include:

1. Buyback offer: Manager to the Buyback Offer of Dwarikesh Sugar Industries Limited through the Tender offer route.

2. Open Offer: Sole Advisor to an Open Offer in Agro Tech Foods Limited pursuant to the multinational ConAgra Brands sale of 51.77% stake to a consortium of Samara Capital and Infinity Group.

3. Left Lead to the proposed IPO of a Society Redevelopment Construction Company.

4. M & A and Sell Side Advisor to a Leading Steel Products Manufacturer.

5. Sole Advisor to a Scheme of Arrangement of DCM Shriram Industries Limited.

6. Advisor to a Scheme of Arrangement in Borosil Scientific Limited.

7. Sole Advisor to two CDR/FDR format restaurant chains in their fund raise plans.

8. M & A and Sell side Advisor to a Diagnostic chain.

9. Sell Side Advisor to a leading internet service provider in their fund-raising plans.

WEALTH

Industry Overview

Along with economic growth, entrepreneurship opportunities continue to create a large pool of High Net Worth Individuals who require efficient wealth management services. To fulfil this demand, companies are investing in automated wealth management solutions. Besides, growing awareness about managing wealth professionally has given an added impetus to the wealth management industry.⁹

The India wealth management industry was valued at $ 429.1 billion in 2023. It is anticipated to expand at a rate of 4.56% per year, between 2025 and 2029. With an anticipated surge to 6.11 lakh High Net-Worth Individuals by 2025, Indias private wealth management sector holds immense potential to grow and prosper. Additionally, India is poised to become the worlds fourth-largest private wealth market by 2028.¹⁰ By offering personalised services and different types of investment options, the asset and wealth management industry is witnessing accelerated growth in India.

Business Overview

Centrum Wealth Limited (CWL) offers a comprehensive suite of Distribution and Family Office services encompassing the investable universe, including ideas from across equities, fixed income, and alternative investments. The firm caters to the diverse wealth and distribution needs of High and Ultra-High Net Worth Individuals (HNIs and UHNWIs), CXOs, global Indians, family offices, and corporate treasuries.

‘Client first remains the operating mantra at Centrum Wealth from inception since 2008. The proposition covers the complete client journey from wealth creation, preservation and pass on phase. With a strong foundation built on the core values of integrity, transparency and empathy, CWL is committed to delivering client-centric and integrated wealth solutions backed by robust in-house asset management capabilities and an innovative technology platform.

Highlights FY2024

The business embarked on a transformative journey during the past year, focusing on three key drivers of the wealth business – Revenue growth, Assets gathering and New Client Acquisition. This initiative aims to take Centrum Wealth to new heights, strengthening its position as a brand known for exceptional wealth expertise across a diverse range of asset classes, including both traditional and alternative investments, as well as public and private market offerings.

Expanding Reach and Capabilities

- Centrum Wealths team of nearly 240 skilled professionals operates across 15 locations, with client coverage extending to more than 75 cities via a hub-and-spoke model. The companys open architecture platform offers clients access to an extensive investment opportunity basket, comprising 100+ discretionary portfolios, 75+ alternative investment funds, and 45+ mutual funds. This comprehensive offering, coupled with CWLs expertise in product innovation and structuring in both domestic and international markets, has attracted more than 5,000 HNI and UHNWI families, corporate treasuries, and family offices, who have entrusted the firm with client assets of about H 39,000 Cr.

Diversified Revenue Mix and Geographic Presence - CWLs tailor made approach to client portfolios, which the firm has adopted since its inception more than a decade ago, is paying off. Short term challenges from regulatory changes to structures of key distribution products have been navigated successfully.

Assets across client segments at Centrum Wealth, grew at 25% CAGR for the past 3 years. More than half of Centrum Wealths clients are sourced through referrals, and 75% of new clients are in the wealth creation phase, showing potential for further growth in AUM in the medium to long term.

Accolades and Recognition - Centrum Wealths commitment to excellence has earned the firm recognition from both local and global industry watchers and media powerhouses.

The company has been certified as a "Great Place To Work" for the third consecutive year, a testament to its strong foundation of people and culture, characterized by open communication and collaborative work environment.

Additionally, CWL was honoured with the prestigious Economic Times Edge Best Brand Award, recognizing its outstanding brand value and customer trust. The firm also received the Euromoney Best for HNIs in India, acknowledging the proposition and client-centric approach to the HNI client segment.

Outlook

According to the Centrum Wealth India Market Pulse 2024 (a survey of CIOs and Fund Managers who manage more than 85% of Indias mutual fund assets), 78% believe that Indias GDP in CY 2024 - 25 will grow between 6% - 7%. Further the Governments ‘AmritKaal vision has put India on a solid trajectory to become the worlds third largest economy by 2030. This creates the perfect backdrop for wealth creation and should result in a heightened demand for professional wealth services. The market for wealth and related services (for those up to

$ 5 Mn networth equivalent) is projected to grow at a mid to high teens CAGR over the next five years, while the segment above $ 5 Mn equivalent, is anticipated to outpace other segments as per Industry watchers.

As the wealth creation story unfolds across the country, with nearly 100 towns and cities expected to have UHNW representation as per Industry reports, Centrum Wealth is strategically positioned to capitalize on this opportunity. The companys current geographical spread covers more than 85% of this addressable market, enabling it to effectively cater to the evolving needs of prospects and clients.

Going ahead, Centrum Wealth remains committed to its ‘Client First approach, leveraging its expertise, innovative solutions, and brand engagement. Hence a wider (with presence in relevant cities and client segments) and deeper (driven by our We For You spirit, with sharper proposition and products) approach is expected to yield promising results.

STOCK BROKING

Industry Overview

ICRA suggests an 18-22 percent increase in the Broking industry revenues and a 22-25 percent rise in net profits YoY for FY24, driven by a resurgence in investor sentiment, improved profitability and positive returns.¹²

In the current fiscal year, the Margin Trade Funding (MTF) segment has seen increased activity, reaching new highs. After maintaining a relatively flat trajectory in FY2023, the overall industry-wide MTF exposure surged by 98% from March 2023 to approximately H 51,000croreasofDecember28,2023.¹³

The financial market is witnessing significant growth due to rebounding investor sentiment. It has led to increased equity mobilization, expansion of the active NSE client base through the addition of new demat accounts and record equity AUMs fuelled by retail participation in mutual funds.

The industry is experiencing a phenomenal growth trajectory due to rising retail participation, improved market sentiment and increased mutual fund exposure. Discount brokerages have also established a strong foothold, with F&O segments reporting relentless growth in comparison to the past few years.

• Institutional Equities

Business Overview

The Institutional Equities business at Centrum Broking offers Broking Services in secondary markets, including IPOs and QIPs, catering to domestic and international institutional investors. The client profile comprises domestic mutual funds, insurance companies, foreign portfolio investors and private equity players. A focused research team and a strong sales and dealing team help offer value-added services. Over the years, the team has put out multi-bagger stock ideas on a regular basis. It uses a differentiated research process for large, mid and small cap companies and offers detailed coverage on both established as well as under-researched, undervalued and under-owned scrips.

Highlights FY2024

In contrast to global trends, Indian markets emerged as a strong performer. The year saw record highs for key indices like Nifty and Sensex, fuelled by robust domestic economic growth and rising consumer demand. Foreign investors remained bullish on India, with significant net inflows throughout the year. This positive sentiment benefitted specific sectors, with Information Technology and Consumer Discretionary witnessing strong growth.

During the year, it hosted multiple virtual investor conferences. ‘Orion – Changing India to prosperous Bharat, the flagship conference, showcased companies with strong fundamentals and a sound growth potential. Additionally, several Dealer Conferences helped investors assess on-ground insights and demand helping them draw a fair assessment on the consumption scenario and future trends in the respective sectors. All conferences saw healthy participation from corporates, investors and trade bodies.

Outlook

With interest rates expected to reduce leading to an increase in consumption, the business expects increased momentum in both its domestic and international outreach and empanelment. It plans on hiring additional senior research analysts to further increase its sectoral coverage and widen its product suite. Backed by the favourable responses received for its earlier investor conferences, it plans to further strengthen its investor and corporate relationships by hosting additional thematic conferences.

• Retail Broking

Business Overview

The Retail Broking division of Centrum Broking Limited (CBL) offers holistic solutions across equity broking, portfolio management and depository services to High Net-Worth Individuals (HNIs) and corporates. The division called the Private Client Group (PCG) offers services that encompass Equities, Derivatives, Currencies and Primary market product offerings. CBL Retail Broking offers depository services, being registered as a Depository Participant with Central Depository Services (India) Limited (CDSL) and is a trading member with the National Stock Exchange of India Limited (NSE) and BSE Limited (BSE). The Technical and Derivatives Desk provides short-term as well as positional ideas, which are best suited for High Net-Worth Individuals (HNIs) traders. The business is primarily focused on servicing customers acquired through the Groups Wealth business franchise,

Centrum Wealth Limited (CWL). The business offers a full-service model with experienced dealers to service high-net-worth clients acquired through the groups private banking franchise, Centrum Wealth Limited (CWL). The dealer servicing model was very well augmented by the technical and derivatives desks, which provided short-term trading ideas and delivered a good performance, beating market benchmarks.

CBL offers a franchisee model to individuals and corporates across the country who have a good experience and track record of running a successful business in financial services.

Highlights FY 2024

During the year the business launched its Digital Proposition Centrum GalaxC targeted at do-it-yourself (DIY) savvy Gen Y and Gen Z population. The business also launched a brand new version of its mobile trading app, Centrum GalaxC Invest offering equity trading, mutual funds and IPOs in the first phase. Going ahead the business plans on launching financial planning, bond offerings and insurance solutions as well. The beta launch made in Q4FY24 has seen good traction amongst customers.

As an extension, the business also introducedCentrumGalaxCLaunchpad, an easy to navigate interface which enables a DIY customer to sign up onto the CBL broking platform in a seamless five minute journey, paperless journey.

The team also worked closely with Unity Small Finance Bank to develop a three in one proposition for the banks customers. The module is under testing in a closed user group and expected to be made live to customers in FY 2025.

It also tied up with multiple fintech partners offering the GalaxC Innovate - Broking as a Service (BaaS) product. It allows the verticals fintech partners to use its open APIs to launch their own front-end interface powered by the Centrum Broking service solution as its backbone. The products developed with the fintech partners are undergoing robust testing and post regulatory approvals, will go live.

Outlook

The new initiatives undertaken are in early stages and FY 2025 marks the beginning of a transition of the business from a pure traditional brokerage into a new generation digital brokerage. It will leverage its relations with multiple fintech and bank partners to capitalise on the growing financial services opportunity in India.

ALTERNATIVE INVESTMENT MANAGEMENT

Industry Overview

Indias robust economic growth has opened up new investment vistas for both domestic and foreign investors. As the worlds fifth-largest economy, the country now boasts a substantial number of high-net-worth individuals (HNIs). Increased household savings, driven by rising per capita income and heightened awareness of financial products, have accelerated Indias transition toward the efficient management of savings growth. Consequently, there is a growing appetite for risk-taking and a quest for unconventional investment avenues.

Alternative Investment Funds (AIFs) have emerged as a robust alternative and are witnessing significant demand. Over the past decade, AIFs have experienced rapid growth in India, positively impacting the investment landscape. Their growth trajectory has been remarkable, expanding tenfold in the last seven years. Notably, AIFs were relatively obscure a decade ago, often considered the exclusive domain of foreign institutional investors.

AIFs represent privately pooled funds that invest across various asset classes, including infrastructure, hedge funds, privateequityandventurecapital.These investment vehicles cater primarily to retail HNIs and ultra-HNI investors who can commit a minimum investment of approximately US$125,000.¹⁵

AIFs offer a compelling avenue for sophisticated investors seeking diversification and potentially higher returns within the Indian market. Their flexibility and ability to tap into diverse investment strategies make them an attractive proposition for those navigating the evolving financial landscape.

Business Overview

Modulus Alternatives Investment Managers Limited is an established alternative asset manager specializing in private credit. One of the early movers in the Indian private credit space, the firm focuses on performing credit opportunities across key sectors – healthcare, industrial, consumer, logistics and capital goods. With an emphasis on capital protection and an active fund management strategy, the firm seeks to deliver steady, attractive risk-adjusted returns to its investors.

Highlights FY2024

FY2024 was a year of performance, people and processes for Modulus Alternatives.

Performance – The business manages 2 category II Alternate Investment Funds. Its maiden fund, Centrum Credit Opportunities Fund (Fund I), has an invested capital (Fund and other investors) of H 1,790 crore and have

returned more than H 1,050 crore to its investors. With 15 marquee investments, the platform has successfully exited 11 of these investments with 3 exits in FY2024. Building upon the robust performance of Fund I, Modulus Alternatives announced the first close of its second fund, India Credit Opportunities Fund II, in August 2023. The investment strategy of this Fund aligns with the approach of the first Fund and focuses on identifying sound companies with strong fundamentals and good credit profiles in the performing credit space. Since its launch, the Fund has made substantial progress and made five investments aggregating to H 591 crore.

People - During the year, the business increased its headcount by more than 80% Y-o-Y. Moreover, the platform has added three industry veterans from State Bank of India to bolster the platform across deal origination, fund raise, and governance. Service Partners play a very crucial role in the overall functioning of the platform. Modulus Alternatives added CRISIL (Valuation) and Ernst & Young Global Limited (Auditor) for its second Fund, apart from Trilegal (Legal Counsel), Beacon Trusteeship Limited (Trustee) and CAMS Investor Services Private Limited (RTA) who continue their services in Fund II from Fund I.

Processes - Investor-centricity was a key focus area during the year with further strengthening of processes for smoother investor on-boarding, reducing TAT for investor queries and efficient and detailed communication during key announcements like distribution of fees, every quarter, new deals in the second Fund, XIRR statements and income and expense statements. In order to further strengthen investor connect, Modulus Alternatives organized various outreach programmes throughout the year. The team organized several video call sessions and face to face meetings to further educate and empower prospects on the various categories within the private credit sector as well as investment opportunities in the Funds as well as the deals of the Funds. Additionally, deal execution processes were further tightened to ensure increased throughput while treasury operations were further built upon to maximize yields of the investor.

Outlook

The private credit market in India is maturing and is expected to reach an AUM US $100 billion over the coming years. The central drivers of growth for the market can be attributed to the change in bankruptcy regime, GDP growth of the country, along with acceptance of private credit as an alternative source of financing by corporates. Moreover, India is on its way to become a $7 trillion economy by 2030 and this provides ample opportunities to both demand and supply side drivers. Long-term and patient capital from private credit funds will play an important role in the growth of the economy.

The potential of the private credit market in India can be ascertained by the fact that just 0.5% Indias GDP is the private credit market while in developed economies, this number stands at 4.5-5% GDP.

AFFORDABLEHOUSINGFINANCE

Industry Overview

After enduring a phase of stagnant growth from FY20 to FY22, Affordable Housing Finance Companies (AHFCs) witnessed a remarkable revival in 2023, registering a year-over-year expansion of 27%. This upward trend in growth is anticipated to stay. Even with the positive trend, it is essential to note that the rate of mortgage adoption in India is still relatively low, at 11%.¹⁷ However, government initiatives like Pradhan Mantri Awas Yojana (PMAY) aims to invigorate the housing finance sector by constructing 2 crore new homes across 305 urban and rural locations. This continues to encourage real estate developers to invest in the affordable housing segment.

As Indias population continues to grow, it is estimated that by 2030, there will be a need for an additional 25 million affordable housing units. Co-lending is predicted to be instrumental in fulfilling this demand and making affordable housing accessible in India. The adoption of advanced technology is expected to facilitate development by enabling a smooth flow of credit to areas of the economy that were previously underserved or not served at all.

With the integration of co-lending and advanced technology, coupled with government initiatives, the affordable housing finance sector in India is poised for significant growth.

Business Overview

Centrum Housing Finance Limited is a professionally managed housing finance company. It provides financial inclusion to low and middle-income (LMI) families in Tier II and III cities by making hassle-free long-term housing finance accessible to them. The business offers Home Loans, Self-Construction Loans, Top-Up Loans and Loans against Property to cater to specific needs using a combination of traditional methods and superior technology. The business has built its operations on a hub-and-spoke model to penetrate deeper into its target markets.

Highlights FY2024

During the year, the Housing Finance Team embarked on several strategic initiatives aimed at enhancing operational efficiency and building organic growth within the business. Following the acquisition of the business operations of South India based NATRUST, the team focused on consolidatingitsoperationsintheregion while seamlessly integrating the team with the larger Centrum ecosystem. This concerted effort facilitated the streamlining of processes, resulting in greater productivity and a steady growth in Assets Under Management (AUM) and disbursals.

The business also grew its workforce across levels including few at the senior management level. At a PAN India level, the business demonstrated organic growth in existing geographies, and has an AUM of H 1,455 crores as of March 31, 2024.

Outlook

With a widespread geographic presence, a competent team and a continued focus by the Government on promoting affordable housing, the business anticipates substantial growth in its AUM and fresh disbursals in the coming year. While the focus will remain strongly on organic expansion, the business will also evaluate opportunistic in-organic initiatives to further stimulate growth.

BANKING

Industry Overview

Industry Overview

ICRA has revised the banking sectors outlook to stable from positive, anticipating healthy credit growth and profitability. Despite potential margin pressure due to a likely rate cut in H2 FY2025, steady operating profits are expected due to loan book growth and benign credit costs. The credit to deposit ratio (CD ratio) is projected to remain high, posing challenges for the net interest margins (NIMs) of banks. However, improving asset quality metrics and steady credit costs should support a mild moderation in Return on Assets (ROA) and a healthy Return on Equity (ROE). The capitalisation and solvency profiles of banks are expected to remain comfortable, supported by internal capital generation and lower net NPA levels.¹⁸

The banking sector is poised for a steady upswing in FY2025, bolstered by managed net non-performing advances and strong credit growth, leading to a positive credit cost outlook. Despite some moderation due to liability repricing, the robust earnings of banks and solid solvency profiles ensure a promising future.

Over the past decade, this sector, growing at a CAGR of ~18%, has been pivotal to credit expansion. Consequently, its share in bank credit surged from 18% in March 2013 to 31% by March 2023. In contrast, the corporate sector has seen slower growth due to weaker asset quality and subdued expansion. Thus, the retail sectors growth has outstripped other segments.¹⁹

Despite facing certain obstacles, the Indian banking sector is strategically poised for prosperity in the intermediate term.

Business Overview

Unity Small Finance Bank ("Unity"/"the Bank") commenced operations in November 2021 with a business model of collaboration and open architecture, uniting all its stakeholders to deliver a seamless digital banking experience. Unitys vision is to make Banking available at customers fingertips using the latest technology. It offers a variety of banking services through its branch and office network. As of March 31, 2024, it has a network of 400+ banking outlets across India.

Highlights FY2024

In the Banks second full year of operations, significant momentum was gained across core verticals including business banking, inclusive banking, and branch banking, with notable growth in both assets and liabilities. The market presents ample opportunities for sustaining this growth trajectory and maintaining a healthy asset portfolio. The Bank recorded an Pre-Provisioning Operating Profit of H 417 crores, reflecting the strength of its core business operations. Noteworthy recoveries in Non-Performing Assets (NPAs), particularly from legacy assets inherited from erstwhile PMC Bank and the Inclusive Banking portfolio, contributed to a healthy Net Profit of ITF H 439 crores. With a Net Interest Margin of 10.8% and a capital adequacy ratio of 36.4%, the bank remains confident in sustaining this growth momentum throughout FY2025. Additionally, the bank made substantial investments towards consolidating and scaling up its technology platforms.

The bank has built a dedicated digital banking team, spanning both business and operational functions. It has commissioned pilots on two credit card programs, the foundations of which are in place and will be launched in FY2025. Furthermore, it has collaborated with its investor - BharatPe, to venture into services of merchant acquiring and lending.

Expanding its footprint into new states such as West Bengal, Telangana, Punjab, Kerala, and Tamil Nadu, in addition to consolidating presence in existing territories, has led to a sizeable workforce of operating from ~400 banking outlets.

Outlook

The Bank anticipates healthy growth in its credit card, personal loans, and merchant lending segments. Partnerships with reputable fintech firms to adopt a multi-channel approach for liability acquisition and CASA building are also underway and should drive good momentum. Additionally, its plans to further strengthen the technology platforms, which will be a key differentiator in offering value added services to customers.

The Bank has in place a five-year plan that aims to serve over 10 million customers and build a loan book exceeding H 50,000 crores, progress of which is on target. The Bank is on track to meet its license conditions to build presence in unbanked rural locations and facilitate priority sector lending, along with harmonizing the grade structures of erstwhile PMC Bank staff. All of which is to be achieved keeping the Banks values at the forefront and while adhering to the highest norms of corporate governance.

Human Resources

Highlights

During the year, the HR team undertook various initiatives aimed at cultivating a thriving organizational culture. Notably, three entities within the group - Centrum Capital Limited, Centrum Wealth Limited and Centrum Retail Services Limited, attained the prestigious Great Place to Work? certification. Centrum Capital and Centrum Retail Services achieved this distinction in their first year of application, with an exceptional Trust Index Score of 91/100. Furthermore, Centrum Wealth Limited secured accreditation as a Great Place to Work for the third consecutive year, reflecting consistently high ratings across all evaluation parameters and reaffirming a steadfast commitment to nurturing a supportive and inclusive workplace environment.

The team also focused on talent acquisition, successfully recruiting high-calibre individuals from both peer organizations and campuses, thereby augmenting the workforces expertise and capabilities across businesses. Several policies were implemented to ensure a favourable work-life balance for employees, wellness sessions were conducted to aid in coping with mental health and other related issues, and numerous training sessions were organised to enhance productivity. Advanced certification courses were also arranged with the aim of developing a learning organisation, boosting employee development, improving employee performance, and positively impacting business outcomes.

In line with a commitment to diversity, the Company prioritized building greater representation from all sections of society within the workforce, resulting in a notable 30% increase in female employees compared to the previous year. As of March 31, 2024, the total number of employees in Centrum Capital Limited was 45, whereas across Group companies, including Unity Bank, the team size is over 5,400.

ESG Approach

ESG (Environmental, Social, and Governance) guidelines have become increasingly important for companies to consider in their operations and decision-making. As a responsible corporate citizen, the Centrum Group is committed to incorporating robust ESG practices as part of its regular operations.

The Group is committed to reducing its carbon footprint, implementing sustainable practices, and preserving natural resources. On a social front, the group is promoting diversity and inclusion, respecting human rights, and engaging with local communities. As part of its Governance approach, the group ensures transparency, accountability, and ethical behaviour throughout the organisation.

It is important to emphasise the Companys efforts to integrate ESG considerations into its overall strategy and decision-making processes. This includes setting specific goals and targets, regularly monitoring and reporting on progress, and engaging with stakeholders to gather feedback and improve performance. By prioritising ESG considerations, the group believes it can not only enhance its reputation and stakeholder relationships, but also contribute to a more sustainable and equitable future for all.

Opportunities and Challenges

Opportunities

The Banking, Financial Services and Insurance (BFSI) sector is expected to grow significantly in the coming years, with government initiatives such as

Digital India, the Unified Payments Interface (UPI), globalisation and a push towards a cashless economy acting as driving factors.

The Indian banking sector is anticipated to experience positive growth bolstered by factors like economic development, government measures and a focus on digitalisation of banking services. Reiterating the ease and accessibility offered to customers, the Consumer Confidence in India has increased to 98.50 points in March, 2024²⁰, a significant transformation driven by government and regulatory initiatives.

The Pradhan Mantri Jan Dhan Yojana, the worlds largest financial inclusion initiative, has led to the enrolment of over 486 million beneficiaries, including over 265 million women. This initiative has expanded the customer base for banks and opened up new avenues for providing financial services. The Reserve Bank of Indias guidelines for setting up Wholly Owned Subsidiaries by foreign banks in India have also encouraged foreign investments into the sector, providing an opportunity for the BFSI sector to access global best practices and technologies. The introduction of Kisan Credit Card loans in a fully digital and hassle-free manner has made credit accessible to the agricultural sector, thereby expanding the market for BFSI services.

From 2023 to 2028, India is projected to experience unparalleled growth in the count of Ultra High Net Worth Individuals (UHNWIs), those possessing a net worth exceeding $30 million, surpassing all other nations.

Challenges

With the increasing reliance on digital technologies, the sector remains vulnerable to cyber threats. The frequency of cyberattacks continue to escalate, ranging from ransomware attacks to data breaches. Financial institutions must, therefore, invest in advanced cybersecurity measures to safeguard sensitive customer data and secure the trust of its patrons.

As digital systems become more sophisticated, the risk of insider threats also grows. Employees or third-party partners with access to critical systems pose a potential risk. Institutions need to implement stringent access controls, conduct regular employee training on cybersecurity best practices and monitor user activities to detect and mitigate insider threats.

The BFSI industry is inherently tied to changes in the countrys economic environment. Economic downturns, whether caused by global crises or regionalfactors,cansignificantlyimpact the financial stability of institutions. With robust risk management practices and diversified portfolios, financial institutions can mitigate such threats. A weak economic environment may also lead to an increase in non-performing assets, which can affect the asset quality of banks. Regular assessments of loan portfolios and early warning systems are, therefore, crucial for identifying and addressing potential NPAs, before its escalation.

Risk Management

At Centrum, an effective risk management policy lies at the core of its business philosophy, which is centred on delivering higher and better returns to all its stakeholders. With ups and downs, volatility and fluctuations in the financial business in which the Company operates, Centrum is exposed to various risks and uncertainties in the normal course of business. Since such variations can cause deviations in the results of operations and affect the Groups financial performance, the focus on risk management continues to be high. Centrums risk management strategy has product neutrality, speed of trade execution, reliability of access and delivery of service at its core. Multiple products and diverse resource streams enable the Company to ensure the continued offering of customised solutions to suit client needs at all times, good and bad.

State-of-the-art technology, experienced professionals and a highly qualified IT team for in-house software development, coupled with adequate backup systems and compliance with regulatory norms, insulate Centrum to a large extent from the vagaries of the financial business.

At Centrum, a company-wide Risk Management Policy (RM Policy) is in place. The RM Policy is based on best-in-class standards and includes the Companys various activities as well as key criteria for effectively managing the various risks it faces. This Company has a systematic and proactive approach to identifying risks and adopting appropriate risk mitigation strategies. Management makes strategic decisions in cooperation with the Board after carefully assessing secondary and residual risks.

Internal Control and Adequacy

Centrum has always focused on maintaining a strong internal control system, which is commensurate with the Groups size and nature of operations. The Companys internal controls are structured to ensure reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use or losses, executing transactions with proper authorisation and ensuring compliance of corporate policies, laws, and accounting standards.

Financial, operational and accounting controls are suitable for the Companys size and scope. To ensure that its business is conducted in an orderly and efficient manner, the Company has devised and implemented numerous controls. Apart from routine and general checks, the Company has processes in place to ensure the accuracy and completeness of accounting records, as well as the timely creation of trustworthy financial data. External professional entities are appointed to analyse the process to ensure that the Company benefits from their subject-area expertise.

Sr. No. Particulars	Reviewed by
1. Internal Audit	F.K. Mody & Co. Chartered Accountants
2. Internal Financial Controls	Sharp & Tannan, Chartered Accountants
3. Secretarial Auditor	Umesh P. Maskeri, Practicing Company Secretary

F.K. Mody & Co. Chartered Accountants has been designated as the Companys internal auditor. Internal Auditing is conducted in accordance with an Internal Audit plan in cooperation with the Audit Committee. The Internal Audit process examines the effectiveness and efficiency of internal control checks and encompasses all important aspects of the Companys operations.

With a strong monitoring system in place, the Company has an Audit Committee, the details of which have been provided in the Corporate Governance Report. Centrum has also appointed an independent Internal Audit Firm. The Audit Committee regularly reviews the Internal Audit Reports as well as the findings and recommendations of the Internal Auditors. Suggestions for improvement are considered and the Audit Committee follows up on the implementation of corrective actions. The Committee also meets with the Companys statutory auditors to ascertain, inter alia, their views on the adequacy of internal control systems and keeps the Board of Directors posted on its observations.

Financial Overview and Key Ratios

During the year, the group focused on building a granular loan book in our Banking and Affordable Housing finance businesses, while continuing with steady consolidation in our Advisory businesses. Unity Banks Net Advances grew ~80% to H 7,961 crore, driven by addition of granular loans to MSMEs and Microfinance borrowers. It maintains a well-funded Balance Sheet with Shareholders Funds at a healthy H 1,907 crore and tie ups for inter-bank credit lines from various leading banks and refinance lines from SIDBI and NABARD. Centrum Housing Finance and

Centrum Wealth continued to remain profitable, whereas the Institutional Business (Investment Banking and Broking) too delivered operating profits. Consolidated Income for the year ending 31st March, 2024 was H 2,239 Crore up ~64% Y-o-Y.

Key Ratios

Sr No. Particulars	FY 2024	FY 2023	YoY Change
1 Debtors Turnover (times)	11.89	7.96	3.93
2 Interest Coverage Ratio (times)	0.20	(0.06)	0.26
3 Current Ratio (times)	0.63	1.74	(1.11)
4 Debt Equity Ratio (times)	1.88	1.62	0.26
5 Operation Profit Margin Ratio (%)	(7)%	(143)%	136.80%
6 Net Profit Margin Ratio (%)	(89.72)%	(279.40)%	189.68%
7 Return on Capital Employed (%)	4.17%	0.74%	3.43%

Cautionary Statement

This document contains statements about expected future events and the financial and operating results of the businesses that are forward-looking. By their nature, forward-looking statements require the business to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results, and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the managements discussion and analysis of Centrum Capital Limiteds Annual Report for FY2024.