HB Leasing & Finance Co Ltd Management Discussions

1. OPERATING RESULTS

During the year under review, the Companys Total Revenue is Rs. 19.02 Lakhs as compared to Rs. 47.58 Lakhs in the previous year. The Company incurred total expenses amounted to Rs. 48.62 Lakhs as compared to Rs.39.75 Lakhs during the previous year. Profit after tax stood at Rs. (29.30) Lakhs as against Profit of Rs.7.81 Lakhs in the previous year.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

The Non-Banking Financial Companies (NBFCs) in India have been pivotal in bridging the credit gap for various segments of the economy. These institutions have complemented the traditional banking sector by offering financial services tailored to the unique needs of their clients, leveraging their extensive geographical reach and quick service delivery. FY2024-25 has been pivotal: NBFCs navigated a maturing growth environment with tempered AUM and concentrated asset quality scrutiny. At the same time, regulatory clarity, co-lending boosts, and digital+green innovation are unlocking new opportunities. Continued prudence in funding strategy, risk management, and tech-enabled inclusivity will shape NBFC resilience and relevance in FY2025-26.

Major stock indices such as the BSE Sensex and NSE Nifty showed gains over the year, reflecting overall market optimism despite volatility. The Nifty Index 50 was opened at 22,455 on 1st April, 2024, rose to 26,135 on 30th September, 2024 and declines to 23,519 on31st march, 2025.

NBFCs are experiencing a slight slowdown in credit growth, with projections suggesting a 13-15% growth rate for FY25 and FY26, compared to the 17% seen in the previous two fiscal years. This deceleration is attributed to factors like the high base established in the post-COVID expansion and concerns about overleveraging in certain borrower segments.

3. OPPORTUNITIES AND THREATS

In FY2025, NBFCs face a mixed outlook with both opportunities and threats. While credit growth is expected to moderate, NBFCs can still capitalize on opportunities in underserved markets, particularly in rural and microfinance sectors, alongside technological advancements. However, they also need to navigate challenges like rising borrowing costs, increased regulatory scrutiny, and competition from banks and fintech companies.

The transformative shift in Indias financial services landscape over recent years, driven by digital innovations such as neo-banking, digital authentication, the proliferation of the Unified Payments Interface (UPI), and increased mobile internet usage, has redefined the dynamics of financial services, especially credit. The modularization of financial services facilitated by these advancements has empowered NBFCs to offer specialized and accessible financial products.

4. FUTURE PROSPECTS AND OUTLOOK

Despite the prevailing global economic challenges, the Indian economy is on a sustained growth and resilient trajectory. The countrys financial infrastructure demonstrates robustness, further reinforced by the continuous improvement in the health of its financial institutions. Although the global economic situation poses potential risks, along with the growing interconnectedness within the domestic financial landscape and the expanding role of Non-Banking Financial Companies (NBFCs) in financial services, the foundational strength of Indias banking sector, characterized by substantial capital reserves, regulatory vigilance, and solid balance sheets, is expected to provide a stable platform.

NBFCs in 2025 are set to evolve into more digitally agile, regulatory-compliant, and customer-centric institutions. While challenges such as funding constraints and compliance costs remain, their ability to innovate and penetrate underbanked segments will secure their critical role in Indias financial ecosystem.

5. RISKS AND CONCERNS

The Company like any other Company is exposed to specific risks that are particular to its business and the environment within which it operates. The Company is exposed to the market risk (including liquidity risk) and also the factors that are associated with capital market, which inter alia includes economic/business cycle, fluctuations in the stock prices in the market, besides the interest rate volatility and credit risk.

Risk Management Policy

The Company has implemented a systematic process to assist in the identification, assessment, treatment and monitoring of risks which provides the necessary tools and resources to management and staff to support the effective management of risks.

The Company is primarily engaged in investment in Securities viz. Equity Shares, Preference Shares, Mutual Funds etc. which involves macroeconomic risks, investee company specific risks, market wide liquidity risks and execution risks relating to the Company / its intermediaries.

(a) The macroeconomic risks, investee company specific risks are covered by investment decisions based on third party research and internal assessment.

(b) Market wide risks are assessed and managed by investment timing decisions.

(c) The execution risk is managed by dealing with reputed intermediaries and through own back office discipline re accounting and follow up of trades.

(d) All investment decisions are made after distinguishing among alternative courses of action with identification of expected risks.

The Company also faces credit default risks, concentration risk and industry specific risk while making Inter corporate loans to other body corporate. The Company performs the credit check on the prospective borrower considering various factors relating to the loan such as loan purpose, credit rating, and loan-to-value ratio and estimates the effect on yield (credit spread). The Company mitigates the concentration risk, industry specific risks by diversifying the borrower pool relating to different industries. The Company periodically monitors and reviews the financial condition, credit rating, debt to equity ratio to minimize the credit default risks associated with the borrowers.

The Company has established Internal Financial Control Systems to provide reasonable assurance regarding safeguarding of assets, maintenance of proper accounting records and the reliability of financial reporting.

The Company controls the operational risks associated with its business activities by way of prescribing / amending processes, imposing controls and defining roles and responsibilities.

The Company assesses the effectiveness of its risk management plan through structured continuous improvement processes to ensure risks and controls are continually monitored and reviewed.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has put in place an effective internal control system to synchronise 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 organisation, providing assurance about safekeeping of the assets and execution of transactions as per the authorisation in compliance with the internal control policies of the Company.

The Audit Committee of the Board of Directors actively reviews the adequacy & effectiveness of the internal control system at periodic intervals in close coordination with the Internal Auditors. Internal Audits are also carried out to review the adequacy of the internal control systems, compliance with policies and procedures.

7. FINANCIAL PERFORMANCE

a) Share Capital: The Companys Issued and Subscribed Share Capital consists of Equity Share Capital only. The Paid-up Share Capital of the Company as at 31^st March, 2025 stood at Rs. 12,86,27,310/- comprising of 12862731 Equity Shares of Rs.10/- each.

b) Financial Assets and Non-Financial Assets: The Financial Assets and NonFinancial Assets for the year under review stood at Rs. 556.24 Lakhs and Rs. 79.29 Lakhs respectively as against Rs. 244.90 Lakhs and Rs. 78.76 Lakhs for the previous year.

c) Financial Liabilities and Non-Financial Liabilities: During the year under review, the Financial Liabilities and Non-Financial Liabilities stood at Rs. 10.84 Lakhs and Rs. 54.04 Lakhs respectively as against Rs. 14.31 Lakhs and Rs. 53.01 Lakhs during the previous year.

d) Key Financial Ratios:

* The Company is a non-deposit taking/accepting Non-Banking Financial Company and asset size of the Company is less than Rs. 100 crores, so Liquidity Coverage ratio is not applicable to the Company.

8. HUMAN RESOURCES

The Company has adequate human resources which is commensurate with the current volume of activity and is reviewed by the management periodically and the Company would induct competent personnel on increase / expansion of the activity.

9. CAUTIONARY STATEMENT

Statements in this “Managements Discussion and Analysis” describing the Companys objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable Securities Laws and Regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include interest rates and changes in the Government regulations, tax regimes, economic developments and other factors such as litigation etc.