Dharani Finance Ltd Management Discussions

Industry structure and developments

The Indian economy is experiencing sustained growth in the financial sector, supported by continuous liberalisation measures. Publications by the Government of India and the Reserve Bank of India highlight that, the Non-Banking Financial Company (NBFC) sector has emerged as a key contributor to credit intermediation, improving credit penetration across retail, MSME, and other segments.

The NBFC sector has demonstrated resilience and stable growth, supported by improved asset quality, stronger capital adequacy, and enhanced regulatory oversight. The focus on financial inclusion, digitalisation, and prudent risk management practices has further strengthened the sectors role in supporting overall financial stability.

Dharani Finance Limited is currently in a developing stage within this competitive financial services environment. The Company is progressively strengthening its market position by leveraging its experience, expanding its network, and maintaining robust systems and processes. It remains committed to adopting sound governance practices and aligning with regulatory expectations.

During the financial year 2025–26, Dharani Finance Limited continues to focus on improving operational efficiency, enhancing customer service, and expanding its reach. The Company aims to increase its contribution to credit delivery for both individual and corporate customers, while maintaining a balanced approach towards growth, asset quality, and risk management. The long-term objective is to achieve sustainable growth and create value for all stakeholders.

Opportunities and Threats:

Opportunities

- The continued growth of the Indian economy and increasing financial inclusion, as supported by initiatives of the Government of India and regulations of the Reserve Bank of India, provide significant opportunities for NBFCs.

- Rising demand for credit from retail customers, MSMEs, and small businesses offers strong growth potential.

- Increasing adoption of digital financial services enables better customer reach, faster processing, and improved operational efficiency.

- Expanding rural markets create new avenues for business growth.

- Supportive regulatory framework and focus on strengthening the NBFC sector enhance long-term stability and growth prospects.

Threats

- Intense competition from other NBFCs, and fintech companies may impact market share and margins.

- Changes in regulations and compliance requirements by the Reserve Bank of India may increase operational costs.

- Economic uncertainties, inflation, or slowdown may affect borrowers repayment capacity and asset quality.

- Rising interest rates can impact borrowing costs and profitability.

- Credit risk and asset quality concerns remain key challenges in the NBFC sector.

- Maintenance of Net owned requirements as per RBI Directions.

Segment-wise or product-wise performance.

Despite facing various internal and external challenges during the year, the Company maintained a resilient financial performance. The loan book increased from Rs. 838.44 lakhs in FY 2024–25 to Rs. 896.00 lakhs in FY 2025–26, primarily driven by growth in the corporate business loan segment, which helped offset the relatively weaker performance in the retail consumer segment.

Net Interest Income (NII) for the year stood at Rs. 78.99 lakhs, compared to Rs. 82.18 lakhs in the previous financial year. Consequently, Profit After Tax (PAT) for the current financial year amounted to Rs. 55.46 lakhs, as against Rs. 83.79 lakhs reported in FY 2024–25.

The Retail segment continued to demonstrate moderate growth, with the number of loan accounts increasing during FY 2025–26, reflecting the Companys sustained focus on expanding its customer base and strengthening its presence in the segment.

Outlook

Looking ahead, Company remains cautiously optimistic about the upcoming financial year. The lending business continues to display resilience and is expected to sustain its positive momentum.

Company remains committed to generating sustainable value for stakeholders through prudent risk management, technology-driven innovation, and a strong focus on customer-centric lending practices.

Risks and concerns

Company maintains vigilant oversight of both external and internal risks to ensure robust mitigation strategies are in place. This proactive approach enables the company to effectively manage emerging threats, capitalize on new opportunities, and respond swiftly to challenges. The principal risks and concerns currently identified are:

- A potential slowdown in the global or Indian economies, possibly triggered by heightened geopolitical tensions.

- A potential downturn in the real estate sector, which may impact collections and loan book growth.

- Difficulties in accessing funds at competitive borrowing costs, which could influence profitability and hinder growth objectives.

Through continuous monitoring of these risks, Company is committed to proactive risk management and seeks to sustain financial strength while pursuing opportunities for long-term growth.

Internal control systems and their adequacy.

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit function is defined in the assignment order. To maintain its objectivity and independence, the Internal Auditor reports to the Chairman of the Audit Committee & to the Chairman of the Board. The Internal Audit monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies. Based on the report of internal auditor, management undertakes corrective action and thereby strengthen the controls. Significant audit observations wherever made and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board.

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

The Company considers its workforce as the cornerstone of its ongoing success. The well-being and motivation of employees are recognized as direct drivers of organizational productivity, efficiency, and overall performance. The company strives to nurture a positive, supportive work environment that addresses employee needs and cultivates a strong sense of belonging and dedication. There are no significant changes (i.e., change of 25% or more as compared to the immediately previous financial year) in key financial ratios, during the financial year.

Cautionary Statement

The Management Discussion and Analysis Report contains certain forward-looking statements, which are based on the current expectations, estimates, and assumptions of the Company. These statements are subject to various risks and uncertainties that could cause actual results to differ materially from those expressed or implied.

The statements made above are based on current expectations and assumptions. Actual results may vary due to changes in business, economic, or other factors affecting the Company.

Investors should exercise caution and make their own assessment before taking any investment decisions.

For and on behalf of the Board of Directors

Dr Palani G Periasamy

Chairman

DIN: 00081002

Date: 16 May 2026

Place: Chennai