Gilada Finance & Investments Ltd Management Discussions

ANNEXURE-VI

MACRO ECONOMIC OVERVIEW

The global economy in FY 2024-25 faced numerous challenges, including fluctuating inflation rates, geopolitical tensions, and varying recovery rates post-pandemic. However, the Indian economy showed resilience with a steady GDP growth rate driven by robust domestic consumption and increased investment in infrastructure. The Non-Banking Financial Company (NBFC) sector played a pivotal role in supporting the financial needs of various sectors, especially MSMEs and retail consumers.

Global economic activity is experiencing a broad based and sharper than expected slowdown. The cost-of-living crisis, tightening financial conditions in most regions, increasingly visible impact of monetary policy tightening by most major central banks and stresses in the Chinese economy all weight heavily on the world economic outlook.

Global interest rates have peaked in the current monetary policy tightening cycle, though macroeconomic conditions remain too fragile and uncertain for a definite view on growth and inflation conditions going forward. Global economy faces multiple challenges, including prospects of slowing growth, large public debt, increasing economic fragmentation, and prolonging geopolitical conflicts. Less-supportive fiscal policies from countries, Cyber risk and climate-related risk are also factors affecting business. Global growth has stabilized towards the end of the year but the improvement is fragile.

The GDP growth rate of India is very much higher as compared to the global average of 2.9 percent. Real GDP growth in India was 7.6 percent in FY 2024-25, up from 7 percent in FY 2022-23, according to the Second Advanced Estimate by the Central Statistical Organization. This growth was driven by a 10 percent increase in capital formation (Capex), led by high public sector investment. Non-agricultural growth was strong, with industry growing by 9 percent and services by 7.5 percent.

Inflation remained at 5.4 percent in FY 2024-25, within the Reserve Bank of Indias 6 percent upper limit. Core inflation was decreasing throughout FY 2024-25 but rose in the last two months, mainly due to services.

INDUSTRY OVERVIEW

The NBFC sector continued its growth trajectory, contributing significantly to the Indian financial system. Regulatory measures by the Reserve Bank of India (RBI) focused on strengthening the sectors resilience and ensuring transparency and accountability. Key developments included the implementation of stricter asset classification norms, enhanced capital adequacy requirements, and increased emphasis on digital transformation.

NBFCs have emerged as the crucial source of finance for a large segment of the population, including SMEs and economically unserved and underserved people. They have managed to cater to the diverse needs of the borrowers in the fastest and most efficient manner, considering their vast geographical scope, understanding of the various financial requirements of the people and extremely fast turnaround times. Nonbank money lenders have played an important role in the financial inclusion process by supporting the growth of millions of MSMEs and independently employing people.

The sector has grown significantly, with a number of players with heterogeneous business models starting operations. The last few years have seen a transformation in the Indian financial services landscape. The increasing penetration of neo-banking, digital authentication, rise of UPI and mobile phone usage as well as mobile internet has resulted in the modularization of financial services, particularly credit.

KEY SEGMENTS

The sustained credit growth in Indias retail market has been creating opportunities for the NBFC sector. As of Financial year 2024-25, Indias retail credit registered CAGR of 15.1% between FY 2019 to FY 2025. In Financial year 2025 alone, the Retail sector grew by 14% propelled by robust demand in key segments such as auto loans, housing loans, credit cards, personal loans and SME loans. The market is expected to further expand at a CAGR of 14% to 16% from FY 2025 to FY 2028 presenting great opportunities for NBFCs to diversify funding avenues and attracting new set of investors. Increased retail participation coupled with sectoral tailwinds, is expected to drive momentum in areas including gold loans, micro loans, consumer durable financing and education loans.

In terms of asset size-wise mix, housing loans and infrastructure loans continue to account for a major chunk of the overall NBFC portfolio. Microfinance loans have increased their share from approximately 3 per cent to 4 per cent between FY19 and FY25. Housing and infrastructure loans are expected to maintain their share in overall NBFC credit. In addition, auto loans, personal loans, MSME loans and microfinance loans are expected to perform better as compared to other segments in FY25-26.

THE COMPANY

The Company is a prominent NBFC in the retail finance industry in India. The regulatory framework for NBFCs to introduce scale based regulation came into effect from October 01, 2022. Under the new framework, NBFCs are placed in one of the four layers viz., Base Layer (BL), Middle Layer (ML), Upper Layer (UL) and a possible Top Layer (TL) based on their size, activity, and perceived risks. The new framework tightens regulatory oversight of the sector with stringent norms for the Upper layers. The Company has been classified as Base Layer under Scale Based Regulatory Framework for NBFCs as per the list issued by RBI. The Company is on schedule in implementing the applicable guidelines and regulatory framework. The Company continues to concentrate on lending to MSMEs and in particular the secured loan segment where the collection efficiency is better. It also aims at improving the business volumes of Vehicle loans, Commodity loans, loans against landed properties.

Key Highlights for FY 2024-25

• Assets under management (AUM): increased from Rs.29.54 Crore to 29.68 Crores

• Total income: increased from Rs.6.53 Crores to 7.10 Crores.

• Net interest income (NII): change from Rs.3.51 Crores to Rs.5.13 Crores.

• Operating expenses to NII stood at 70%.

• Impairment on financial investment: NIL. (Note 15)

• Profit before tax (PBT): increased fromRs.2.34 Crores to 2.89 Crores.

• Profit after tax (PAT): increased from Rs.1.70 Crores to 2.13 Crores.

• Gross NPA stood as 5.73 % and Net NPA stood as 4.85 %

• Capital adequacy ratio as of 31 March 2024 is 59.08%, which is well above the RBI norm of 15%. Tier I capital adequacy is 51.56%.

RISK MANAGEMENT

As a NBFC, GFIL is exposed to credit, liquidity, operational, market and interest rate risk. It continues to invest in talent, processes, and emerging technologies to build advanced risk management capabilities. The Companys sustained efforts to strengthen its risk framework have resulted in stable risk metrics.

The Company promotes a strong risk culture that is embedded across the organisation. At the highest level, the Board of Directors has established a Risk Management Committee (RMC), which assists the Board in maintaining oversight and review of the risk management principles and policies, strategies, risk appetite, processes, and controls. This is enabled by a robust governance system and review mechanisms.

With the impact of the pandemic waning during FY2023, the risks revolving around inflationary trends, elevated interest rates and tighter systemic liquidity emerged as challenges which needed to be addressed. GFILs risk framework has ensured that, despite these risks, its net interest income, NPAs and liquidity management were not impacted.

Moreover, the Company has a robust asset-liability management framework and maintains enough liquidity buffer to meet its repayment obligation and emerging credit demand. By virtue of effective focus on capital and liquidity management, reduction in operating expenses, focus on debt management, servicing capability and strengthening of underwriting norms combined with a very sharp view on risk metrics, the Company ought to continue to show higher level of efficiencies in all parameters.

SWOT Analysis Strengths

• A unique relationship-based business model with extensive experience and expertise in credit appraisal and collection process.

• Well-defined and scalable organizational structure based on product, territory and process knowledge

• Technology platform integrated across process as well as for onboarding customers

• Consistent financial track record with rapid growth in AUMs

• Robust financial management with balanced ALMs and lower NPAs

• Experienced senior management team

• Strong relationships with public, private banks, institutions and investors

• Target niche segments and underserved populations that banks may overlook, such as small businesses and low-income individuals.

Weakness:

• Business and growth are directly linked with the GDP growth of the country.

• The Companys customers, MSMEs, are more vulnerable to the negative effects of economic downturns.

• Higher exposure to unsecured loans can lead to higher default rates, impacting the financial health of the organization.

Opportunities:

• Increasing Government regulations and tightening of norms to restrict competition and deter the entry of unorganized players, thus benefiting the leaders in the industry

• Increasing geographical reach and a higher customer base create opportunities to penetrate further into the hinterland

• Increasing disposable income, change in consumption pattern and shift in mindset to spend bringing in higher demand for consumer loans

• Government initiatives to increase spending in the MSME segment to increase startup businesses and thus demand MSME loans

• Indias financial inclusion is still at a nascent stage, providing an opportunity for NBFCs to fill the gap and reach the unbanked and underbanked population

• NBFCs have opportunity to provide financing solutions to MSMEs, which have traditionally struggled to access credit from banks

• Growth in the commercial vehicle, passenger vehicle and tractors market, presents opportunities for financing.

• Meeting working capital needs of the customers in the commercial vehicle eco-system

• Higher budgetary allocation by the Government to boost the infrastructure sector, involving the construction of roads, new airports, ports, etc., creates a huge demand for commercial vehicles

Threats:

• Competition from captive finance companies, small banks, Fin Techs and new entrants

• Inadequate availability of bank finance and an upsurge in borrowing costs

• External risks associated with liquidity stress, political uncertainties, fiscal slippage concerns, etc.

• Increasing competition from global and local competitors in terms of product development and technology innovations, leaving very thin margins of error

• Regulatory and compliance-related changes in the sector affecting NBFCs

SEGMENT-WISE PERFORMANCE

There is no separate reportable segment as per IND AS 108 on “Operating Segments” in respect of the Company.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has a well-defined organizational structure, documented policy guidelines, and a defined authority matrix that ensures efficiency of operations, compliance with internal policies and applicable laws and regulations, as well as protection of resources. The Company believes that a strong internal control system and processes play a critical role in the day-to-day operations of the Company. To this end, the Company has put in place an effective internal control system to synchronize its business processes, operations, financial reporting, fraud control, and compliance with extant regulatory guidelines and compliance parameters. Strict internal control and systems are devised as a depiction of the principles of the highest standards of governance. The Company ensures that a standard and effective internal control framework operates throughout the organization, providing assurance about safekeeping of the assets and execution of transactions as per the authorization in

compliance with the internal control policies of the Company. The internal control system is supplemented by extensive internal audits, regular reviews by the management and standard policies and guidelines, which ensure reliability of financial and all other records. The Management periodically reviews the framework, efficacy, and operating effectiveness of the Internal Financial Controls of the Company, broadly in accordance with the criteria established under the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Tredway Commission (“COSO”). The Internal Audit reports are periodically reviewed by the Audit Committee. The Company has, in material respect, an adequate internal financial control over financial reporting and such controls are operating effectively. Internal Audits are carried out to review the adequacy of the internal control systems, compliance with policies and procedures. Internal Audit areas are planned based on inherent risk assessment, risk score and other factors such as probability, impact, significance and strength of the control environment. Its adequacy is assessed, and the operating effectiveness was also tested.

FINANCIAL PERFORMANCE

During the financial year under review, your company has made substantial disbursements and was able to report positive returns. Detailed financial performance has been given in Directors Report.

HUMAN RESOURCES

Gilada Finance and Investments Limited (GFIL) proudly acknowledges its employees as its most valuable asset. Recognizing the critical role that its workforce plays in delivering great results synonymous with excellence, the Company is committed to fostering a supportive and dynamic work environment. The Companys core philosophy is centered around promoting a safe, healthy, and happy workplace while fostering a conducive work environment among its employees. The HR department promotes a culture of integrity, honesty and a constant learning attitude, while also maintaining cordial relationships, equal opportunities and policies to prevent harassment. The Company constantly works towards promoting a respectful and secure workplace and aims to provide its employees with careers, not just jobs, and creating an environment of trust, confidence and transparency.

The HR policies of the Company are designed to empower its workforce with knowledge and build their capabilities to grow and prosper in a healthy work environment. Through a performance-driven culture, the Company motivates its employees to deliver excellence. As we scale up our business and strive to build a future-ready organization, talent attraction and retention, employee development and well-being, equal opportunities and harmonious relationships are key areas of focus. Our HR processes are guided by well-defined competencies and Company values.

CAUTIONARY STATEMENT

The statements made in this report describe the Companys objectives and projections that may be forward looking statement within the meaning of applicable laws and regulations. The actual result might differ materially from those expressed or implied depending on the economic conditions, government policies and other incidental factors which are beyond the control of the Company. The Company is not under any obligation to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments, information or events.

BY AND ON BEHALF OF THE BOARD OF DIRECTORS
FOR GILADA FINANCE AND INVESTMENTS LIMITED
Sd/-	Sd/-
RAJGOPAL GILADA	SAMPATHKUMAR GILADA
MANAGING DIRECTOR	DIRECTOR
DIN: 00307829	DIN: 02144736
DATE: 08 August, 2025
PLACE: BANGALORE