Dar Credit & Capital Ltd Management Discussions

Dar Credit & Capital Limited (DCCL) for Financial Year 2025-2026 continues to play a pivotal role by complementing the banking sector and enhancing credit penetration, particularly in underserved and unbanked segments. NBFCs have emerged as key enablers of financial inclusion by catering to retail customers, small businesses, and secured and unsecured MSMEs, who often face challenges in accessing formal banking channels.

In recent years, the sector has witnessed steady growth driven by increasing demand for retail credit, expansion in MSME financing, and rising consumption trends. Segments such as secured lending, microfinance, and small business loans have shown robust performance, supported by improved credit assessment models and digital adoption. The growing emphasis on financial inclusion and government initiatives has further supported credit expansion in semi-urban and rural areas.

Your Company operates primarily in the MSME lending segment, focusing on providing credit

facilities to small business owners and individuals from low-income groups. By accepting collateral such as residential properties, shops, and land, the Company aims to balance growth with prudent risk management. This approach not only enhances asset quality but also ensures sustainable expansion of the loan portfolio.

Overall, the Company is well-positioned to leverage emerging opportunities in the NBFC sector while maintaining a balanced and sustainable growth trajectory.

A. Industry Structure and Developments

Non-Banking Financial Companies (NBFCs) have emerged as the primary source of financing for a vast section of the population including small and medium-scale enterprises as well as the economically unserved and underserved individuals. They have been able to meet the diverse requirements of borrowers in the most efficient and timely approach considering their wide geographic reach, comprehension of the numerous financial needs of people, and extremely swift turnarounds. Therefore, Non-Banking Financial Companies (NBFCs) have contributed significantly to the cause of financial inclusion in this process and have also been a key component in fostering the expansion of millions of MSMEs and self-employed people.

NBFCs, particularly those focused on MSME lending, have been instrumental in supporting business expansion, working capital requirements, and asset creation by offering customized, non- collateraland collateral-backed loan products. Their ability to assess nontraditional income profiles and provide quicker loan disbursements has enabled wider credit penetration in semi-urban and rural markets. Non-Banking Financial Companies (NBFCs) have played a crucial role in fostering credit expansion across a range of industries, including microfinance loans, personal loans, and auto finance loans.

NBFCs have become increasingly important in recent years as they have played a critical role in providing credit to individuals and businesses that are underserved by traditional banks. This is especially true in rural and semi-urban areas, where NBFCs have been able to fill the gap left by banks.

One of the key advantages of NBFCs is their ability to be flexible in their lending practices. Unlike banks, which have a rigid set of guidelines for lending, NBFCs can tailor their lending practices to meet the specific needs of their clients. This has made NBFC(s) an attractive option for those who are looking for more personalised financial services. They are financial institutions that provide a wide range of banking services like loans, credit facilities, investments, and other financial products.

NBFCs have played a significant role in the Indian economys growth story, especially in the rural and semi-urban areas. They cater to the financial needs of small and medium-sized businesses, entrepreneurs, farmers, and individuals who do not have access to traditional banking services.

Another advantage of NBFCs is their ability to provide loans quickly. Unlike banks, which have a lengthy approval process, NBFCs can approve loans much faster. This is because they have a smaller bureaucracy and can make decisions quickly.

NBFCs have become increasingly important in India owing to the use of technology to reach wider audiences. Your Company, DCCL have developed digital platform (VIJAY) that allow customers on boarding online, making the process faster and more convenient. This has helped to attract a younger, wider customer base.

B. Opportunities and Threats Opportunities

Despite the challenges, NBFCs have continued to grow in India. The government is taking several measures to ease the challenging situations prevailing in the sector by way of providing liquidity support to NBFCs, Housing Finance Companies (HFCs), as well as Microfinance Institutions (MFIs) and introducing partial credit guarantee schemes, etc.

NBFCs have increasingly been playing a significant role in financial intermediation by complementing and competing with banks, and by bringing efficiency and diversity into the financial ecosystem. NBFCs enjoy greater operational flexibility to take up a wider scale of activities, enter new geographies and sectors and thus grow their operations.

Source:

https://www.ibef.org/research/case-study/nbfcs-building-the-future-of-india

As per Crisil Ratings Limited, the assets under management (AUM) of nonbanking financial companies (NBFCs) will grow a steady 18-19% in F.Y. 2025-26 and the next F.Y. (i.e. 2026-27), driven by whetted consumption demand, and cross the Rs 50 lakh crore mark by March 2027 (see chart in annexure).

Further, during the F.Y. 2025-26, Dar Credit & Capital (DCCL) had welcomed the decision by the Reserve Bank of India (RBI) to reduce the benchmark repo rate by 50 basis points dated on Friday, 06^th June 2025, with this the repo rate had stand at 5.5% from 6%. This strategic move by the central bank had significantly lower our cost of funds and it has supported our bottomline performance.

The repo rate reduction directly impacts the interest rates at which financial institutions borrow short-term funds from the RBI.

As a key player in MSME sector, DCCL has seen an immediate and positive effect on its funding costs. Lower borrowing costs translate into improved net interest margins (NIMs) - the difference between the interest we earn on loans and the interest we pay on borrowings.

Key benefits for DCCL:

1. Reduced Cost of Funds.

2. Improved Net Interest Margins (NIMs): Widening the spread between lending and borrowing rates.

3. Enhanced Profitability: Increased

NIMs flowing directly to improved net income and bottom line results.

4. Greater Lending Flexibility: Potential to offer more competitive rates to creditworthy customers, supporting business growth and customer acquisition/retention.

While DCCL had benefited from improved margins, the company had also recognized the RBIs intent to stimulate economic activity. Your Company has always been duly committed to responsibly passing on the benefits of this rate cut to our customers where feasible and appropriate, contributing to broader economic momentum.

Threats

NBFCs also have their share of challenges. One of the biggest challenges facing NBFCs in India is access to funding. Unlike banks, which have access to low-cost deposits, NBFCs must rely on borrowing from banks or other financial institutions including issuing bonds to raise funds.

Asset quality risk also remains a key concern, especially when catering to MSMEs and low-income borrower segments, which are more vulnerable to economic fluctuations, income instability, and unforeseen disruptions. Any deterioration in repayment capacity can lead to an increase in non-performing assets (NPAs), thereby impacting profitability and capital adequacy.

Further, Base Layer NBFCs face specific constraints due to their size and operational scale. Limited access to diversified funding sources, lower bargaining power with lenders, and relatively higher dependency on traditional borrowing channels may restrict their growth potential. Additionally, such NBFCs may face challenges in scaling operations, investing in advanced technology, and building robust risk management systems compared to larger NBFCs

In addition, Base Layer NBFCs may face operational challenges such as limited geographic diversification, dependence on specific customer segments, and constraints in attracting and retaining skilled human resources. These factors may affect their ability to sustain long-term growth and resilience.

Despite these challenges, DCCL continue to adapt through prudent lending practices, focus on secured lending, and gradual adoption of technology to strengthen their operational efficiency and risk management frameworks.

C. Segment- wise or Product- wise Performance

In a significant move to strengthen financial inclusion and empower MSME businesses, DCCL entered a Business Correspondent (BC) agreement with Kaleidofin Capital Pvt ltd, a prominent NBFC known for its inclusive financial solutions.

Through this strategic partnership, which is in addition to the existing relationship with SIDBI and ESAF BANK, DCCL had aimed to expand credit access to MSME entrepreneurs by offering collateral-free loans in the range of Rs50,000 to Rs3,00,000. The initiative was specifically designed to support MSME businesses in underserved and underbanked communities, thereby fostering economic independence and local development.

Kaleidofin, with its strong digital infrastructure and deep understanding of customer needs, had served as the Business Correspondent to facilitate customer sourcing, onboarding, and servicing. The partnership leverages the strengths of both organizations—DCCLs expertise in MSME lending and Kaleidofins robust customer-centric approach.

D. Outlook

The outlook for FY 2026-27 remains positive yet cautious for the NBFC sector, underpinned by strong domestic consumption, targeted policy interventions, and robust credit demand from MSMEs and retail segments. Government initiatives, coupled with RBIs regulatory measures, are expected to enhance sector resilience while creating opportunities for well- governed NBFCs.

E. Risks and Concerns

The Companys business and financial performance are subject to various risks and uncertainties. While the Company has instituted risk management frameworks to mitigate these challenges, the following key risks could materially impact its operations, financial condition, and ability to meet its obligations:

1. Credit Risk and Asset Quality

The Companys lending business inherently exposes it to credit risk, including the risk of borrower defaults. Any increase in Non-Performing Assets (NPAs) may adversely affect profitability, liquidity, and overall financial stability. Additionally, the Companys ability to meet its obligations, including servicing of debt securities, depends on the quality and recoverability of its loan portfolio.

2. Interest Rate Risk

The Companys income is sensitive to fluctuations in interest rates, which are influenced by monetary policy, inflation, and macroeconomic conditions. Volatility in interest rates may impact borrowing costs, lending margins, and overall financial performance.

3. Liquidity and Funding Risk

The Company relies on capital markets and borrowings to fund its operations and growth. Any disruption in access to funding, increase in cost of funds, or adverse changes in credit ratings could constrain liquidity and affect business expansion plans.

4. Credit Rating Risk

Any downgrade in the Companys credit rating due to deterioration in financial performance or external factors may increase borrowing costs, reduce investor confidence, and negatively impact the valuation and marketability of its debt instruments.

5. Economic and Political Risk

As the Companys operations are concentrated within India, its performance is closely linked to domestic economic conditions.

Slowdown in economic growth, inflationary pressures, or political and policy uncertainties may reduce credit demand, increase defaults, and adversely impact financial performance.

6. Geographic Concentration Risk

A significant portion of the Companys loan portfolio is concentrated in a few states. This exposes the Company to region-specific risks such as economic downturns, regulatory changes, natural calamities, or adverse borrower behavior in these regions, which may impact collections and asset quality.

7. Market and Liquidity Risk of Debentures

The Companys debt securities, including non-convertible debentures (NCDs), may face limited liquidity in the secondary market. Investors may find it difficult to exit investments prior to maturity, and market prices may be influenced by interest rate movements, economic conditions, and the Companys financial performance.

8. Absence of Debenture Redemption Reserve

As permitted under applicable regulations for NBFCs, the Company is not required to maintain a debenture redemption reserve for privately placed debentures. This may increase reliance on operational cash flows and refinancing for repayment obligations.

9. Taxation, Legal and Accounting Risks

Changes in tax laws, accounting standards, or legal interpretations may affect the Companys financial statements, profitability, and investor returns.

F. Internal Control System and their adequacy

The Company has its own process driven framework for internal financial controls. The Board is of the opinion that the Company has sound internal financial controls commensurate with the nature and size of its business operations; wherein controls are in place and operating effectively and no material weaknesses exist.

G. Discussion on financial performance with respect to operational performance.

(Amount in lakhs)

Particulars	Year Ended 2025-2026	Year Ended 2024-2025
INCOME
Revenue from Operations	4,989.33	4,030.44
Other Income	15.79	108.87
Total income (A)	5,005.12	4,139.30
Expenses
Employee Benefits Expense	861.33	626.47
Finance Costs	2,097.91	1,953.67

 

Particulars	Year Ended 2025-2026	Year Ended 2024-2025
Depreciation and Amortization Expenses	78.90	67.40
Provisions	25.70	15.00
Other Expenses	648.95	571.73
Total expenses (B)	3,712.79	3,234.26
Profit before tax [C = (A-B)]	1,292.32	905.04
Exceptional Items [D]	-	-
Profit before extraordinary items and tax [E = C-D]	1,292.32	905.04
Tax expenses
Current tax	(277.73)	(201.13)
Deferred tax	1.07	0.53
Taxes of earlier Year	(2.70)	-
Total tax expenses (F)	(279.35)	(200.60)
Profit during the period [ F - E ]	1,012.97	704.44
Earnings per Equity Share:
(a) Basic	7.45	7.04
(b) Diluted	7.45	7.04

H. Material developments in Human Resources/ Industrial Relations front, including number of people employed.

The Company views its people as its most valuable asset and a key driver of sustainable growth. Focus remained on building a skilled, motivated, and adaptable workforce. Efforts were also made to promote an inclusive and collaborative culture, encouraging open communication and teamwork across all levels. The Company remains committed to employee well-being, professional development, and fostering an environment that enables individuals to realize their full potential. During the period under review, there were no material developments in Human Resources. Further, during the F.Y. 2025-26, 261 no. of people were employed by the Company.

I. Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore.

During the period under review, there has been no significant changes in the Key financial ratios of the Company.

J. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

The Return on Net Worth (RONW) of the Company has improved to 9.82% in FY 2025-26 as compared to 9.58% in FY 2024-25. This marginal increase is primarily attributable to the strengthening of the Companys capital base following the infusion of funds through the Initial Public Offering (IPO). The enhanced net worth has supported the expansion of the Companys lending portfolio and improved overall financial stability, thereby contributing to better returns.

Disclosure of Accounting Treatment

The financial statements for the financial year 2025-26 comply with the applicable Accounting Standards, with no deviations there from.

For and on behalf of Dar Credit & Capital Limited

Sd/-

Ramesh Kumar Vijay

Executive Chairman

DIN:00658473

Date: 17/06/2026

Place: Kolkata