ICRA Ltd Management Discussions

(Annexure to the Directors Report)

A. Industry Structure and Developments

Ratings & ancillary services

Bond issuances grew at a muted pace despite the multiple rounds of rate cuts in FY2026 as the yields rose due to the indirect impact of the geopolitical headwinds. As yields remained elevated the demand shifted from Bonds to Banks which offered competitive rates. Overall domestic credit however grew at a higher rate than the previous year supported, in part, by a higher GDP growth.

Bank credit to NBFCs grew at a faster rate in FY2026 than the previous year as the Private consumption picked up supported by rate cuts by RBI as well as GST rationalisation to offset the global headwinds. The credit offtake to the industrial segment was broad-based including the Infrastructure segment. Bond issuances were supported by the corporate segment which was able to offset the decline in issuances from NBFCs and Bank.

A conducive credit environment as reflected by a consistently strong credit ratio [measured as the ratio of number of upgrades to downgrades] with low leveraging in large corporates supported the domestic credit market growth which also benefited from multiple rate cuts.

Going ahead, the near-term outlook for rating business would depend on the duration of the West Asia crisis and its impact on the global trade. Our countrys GDP expansion would be a function of crude oil prices as well as the availability of various inputs. Besides, the state of the monsoons, specifically if they are below normal as has been currently predicted, can also have an adverse impact on domestic growth and inflation outcomes. In line with the trends seen in FY2026, capex would remain concentrated in policy-supported and growth- oriented sectors. Infrastructure and financial sector would continue to be the areas of opportunity for your Company in FY2027.

Research & Analytics

The Research & Analytics (R&A) segment delivered a strong financial performance in FY26, driven by acquisition of Fintellix, increased demand for risk and compliance related analytics solutions and improved execution of ongoing projects.

The KnowTech division recorded broadbased revenue growth, supported by stable performance in core service areas and favourable foreign exchange movements. However, overall growth remained moderated due to discontinuation of certain engagements arising from increased automation and process rationalisation across client workflows.

The Company continued to invest selectively in strengthening global delivery capabilities and expanding client engagements. At the same time, the accelerating adoption of automation and Generative AI is reshaping client requirements. In response, capabilities are being aligned through partnerships on business transformation initiatives, including migration from legacy platforms, adoption of advanced technologies within delivery workflows, and reinforcement of governance and changemanagement frameworks to ensure seamless and compliant transitions.

The BankTech divisions revenue growth was driven by the acquisition of Fintellix and improved execution of ongoing project implementations. The integration of Fintellix represents an important milestone in the Companys BankTech strategy, strengthening its product portfolio and enhancing capabilities across risk, regulatory, and compliance solutions for banking clients.

The business faced headwinds from lower-than-expected new client additions and heightened competitive intensity in its core markets. Notwithstanding these challenges, demand for flagship offerings, including the Early Warning System (EWS), Expected Credit Loss (ECL), and Asset Classification solutions, remained stable, supported by sustained regulatory focus on credit lifecycle management, asset quality monitoring, and supervisory reporting.

The Company continues to strengthen its growth trajectory through sustained investments in product enhancement, platform consolidation, and deeper solution integration, with a focus on improving scalability, delivery efficiency, and readiness to address evolving regulatory and governance expectations.

The CapTech divisions revenue growth was driven by expansion in fixed income analytics and mutual fund services with solutions catering to the mutual fund industry. Growth was supported by sustained demand for data-driven analytics and reporting solutions, particularly among regulated market participants navigating heightened requirements around portfolio transparency, valuation, and risk monitoring.

While discretionary spending remained selective across parts of the asset management ecosystem, demand for compliance-oriented, high-quality market data and analytics solutions remained resilient.

The domestic regulatory environment continued to evolve, including initiatives enabling new investment structures such as Specialized Investment Funds (SIFs), which further reinforced demand for robust market data, risk analytics, and compliant labelling frameworks. In line with this, the Company continued to enhance its CapTech offerings by strengthening product capabilities and aligning its solutions to evolving regulatory expectations and client requirements in the asset management and capital markets segments.

As regulatory intensity and the accelerated adoption of Generative AI continue to reshape client requirements, the Research & Analytics segment focused on strengthening its strategic position through expanded global engagement and enhancement of its solution portfolio.

Sustained investments in analytics platforms, compliance-oriented capabilities, and scalable delivery frameworks are enabling the Company to address evolving market needs, deepen international client relationships, and support long-term growth.

(A detailed overview of the businesses is presented in the section titled Review of Operations in the Directors Report.)

B. Opportunities and Threats Opportunities

The Ratings business continues to benefit from a favourable regulatory environment. The Securities Exchange Board of India (SEBI) and Reserve Bank of India (RBI) continue to support enhanced financing through the capital market route. The risk appetite for lower rating grades is a constraining factor in the capital market but with newer classes of investors like Alternate Investment Funds, investment in these high-yielding credits is picking up. These entities would invest in credit enhanced structures too.

The regulatory environment is consistently favouring tighter rating standards including high quality and timely ratings. Your Company with a strong Board oversight has the appropriate process and governance standards to achieve this.

ICRAs wholly owned subsidiary, ICRA ESG Ratings Limited is registered as a Category-I ESG Rating Provider (ERP). This offers a significant business opportunity as ESG ratings are sought by a certain class of investors such as Impact Funds.

The trend of increasing regulatory oversight coupled with drive toward automation, Gen AI and data driven analytics is expected further strengthen the demand for deep sectoral research, advanced risk analytics, high quality data, and related support services. Your Company remains committed to providing state of the art products in the Risk Analytics and Research space and cater to emerging demand in this space, including in ESG consulting.

ICRA is well placed to benefit from each of the opportunities stated above, given its competitive strengths and strategic initiatives. We believe that your Companys competitive strengths include a proven track record in ratings, a highly experienced talent pool, advanced analytical capabilities, strong brand recognition, diverse client profiles, a robust governance structure, and close association with the Moodys Group.

Research & Analytics

The expanding regulatory agenda across India and select international markets presents a sustained growth opportunity for the Companys Research & Analytics business. In India, the Reserve Bank of Indias transition to an Expected Credit Loss (ECL) framework, effective from April 2027, is expected to require banks and NBFCs to strengthen credit risk modelling, data infrastructure, model governance, and provisioning systems. These requirements are closely aligned with the Companys BankTech capabilities, positioning it to support institutions through both implementation and ongoing compliance.

Indias asset management industry continues to benefit from structural growth, supported by rising household financialisation and increasing regulatory sophistication. SEBIs recent regulatory initiatives·covering portfolio transparency, risk classification, stress testing, valuation governance, and market conduct·are increasing demand for reliable, independent market data and analytics.

The Companys CapTech segment, supported by longterm historical mutual fund datasets, fixed income valuation expertise, and structured finance monitoring capabilities, is well placed to support asset managers across asset classes and evolving product structures.

The advancement of Generative AI and intelligent automation provide an opportunity to enhance delivery efficiency and analytical depth across research and knowledgeintensive workflows.

By embedding AI within controlled, humanintheloop frameworks, the Company aims to improve productivity, reduce turnaround times, and offer differentiated analytical outputs, while maintaining governance, transparency, and auditability standards required by regulated clients. Over time, AIaugmented delivery is expected to support stronger client engagement and improved operating leverage.

The Company has established delivery relationships across multiple international markets, including the Middle East, the United Kingdom, the United States, and SouthEast Asia. Regulatory developments in these jurisdictions·particularly relating to credit risk, model governance, and ESG·are incrementally expanding the addressable market for analyticsled regulatory support. The Companys experience in supporting multijurisdictional regulatory and analytics requirements provides a scalable platform to deepen international client relationships and progressively expand its global footprint.

Threats

The threats confronting the business have been discussed in details in Section D of this report.

C. Segment-wise or Product-wise Performance

Details on segment-wise performance have been discussed in Section F of this report.

D. Risks and Concerns

(1) Business Risks

The Companys businesses are influenced by macroeconomic conditions, financial market activity, and credit cycles in India and key international markets. An economic slowdown, sustained volatility in interest rates, credit spreads, foreign exchange movements, or a deterioration in credit conditions could adversely impact bank credit growth, debt market issuance, and demand for credit sensitive products, thereby affecting the performance of the rating business. In addition, adverse credit events, including defaults by significant issuers or sharp rating transitions, may affect market sentiment and brand perception.

For the Research and Analytics business, a prolonged downturn or weakness in financial markets and institutional profitability could result in reduced discretionary spending on research, analytics, and advisory engagements, including deferral or scope reduction of client projects. International operations are also exposed to global macroeconomic developments and currency movements.

To mitigate these risks, the Companyclosely monitors macroeconomic, market, and regulatory developments, supported by earlywarning systems and analytical tools. The Company remains focused on maintaining the robustness, quality, and credibility of its analytical outputs across businesses, while continuing to invest in products, technology, people, and brandbuilding initiatives to support resilience and sustainable growth across market cycles.

Gen-AI Disruption

Rapid advancement of Generative AI and automation may alter demand patterns for certain research, analytical and data services. Increased client adoption of AI-enabled tools could reduce the scope or pricing of our offerings. While regulatory governance requirements limits full-fledged AI substitution in the Companys core regulated-institution client base, lower-complexity and higher-volume analytical tasks face greater exposure. The Company is embedding AI responsibly into its delivery model to enhance productivity while preserving governance, transparency, and auditability standards.

To mitigate these risks, the Company is proactively integrating Generative AI and automation into its service delivery in a controlled and responsible manner, with a clear emphasis on governance, transparency, and auditability. The focus remains on augmenting analytical capabilities and productivity rather than substituting corejudgementbased processes, particularly for regulated institutional clients. In parallel, the Company continues to upskill its workforce, deepen domain expertise, and enhance higher value, complex analytical offerings, while aligning its solutions with evolving regulatory frameworks.

(2) Operational Risk

The Company relies on information and data obtained from clients and thirdparty sources, the accuracy and completeness of which may not always be independently verifiable. In certain circumstances, the Company is required to rely on representations provided by such parties. Accordingly, the quality and reliability of the Companys analytical outputs are inherently dependent on the accuracy and integrity of the underlying information.

To mitigate this risk, the Company has established robust process controls, governance frameworks, and quality assurance mechanisms to support accurate data sourcing, processing, and delivery. Technologyenabled platforms are used to automate workflows, enhance data integrity, and reduce reliance on manual interventions. These controls are complemented by regular training programmes, structured reviews, and supervisory oversight to consistently reinforce execution quality.

(3) Information and Cyber Security Risk

The Companys operations are reliant on secure and resilient information technology systems and data assets. Cyber incidents, including unauthorised access, data breaches, or system disruptions, could result in financial losses, operational disruption, regulatory exposure, and reputational harm. Inadequate information security controls across processes or technology could also compromise the confidentiality, integrity, or availability of sensitive data.

To mitigate these risks, the Company has implemented a comprehensive, multilayered information security framework supported by a formal Information Security Management System. The framework incorporates preventive and detective controls, continuous security monitoring, secure access protocols, regular audits, and compliance with recognised security standards and regulatory requirements. These controls are reinforced through ongoing employee awareness programmes, governance oversight, and risk transfer measures, including cyber insurance, to strengthen cyber resilience and business continuity.

(4) Policy and Regulatory Risk

Material changes in the regulatory and policy framework governing could affect the company business and financial performance as a significant portion of your Companys revenues come from rating services, which are influenced by regulatory requirements. Regulatory bodies, like SEBI and RBI, have enhanced disclosure and monitoring requirements for credit rating agencies with an objective of bringing in more transparency in the capital market. Further, the Companys Research and Analytics segment provides technology solution across multiple regulated domains, including credit risk, regulatory reporting, market data, and compliance analytics. The pace and volume of regulatory change, particularly across the jurisdictions in which the Company operates or intends to operate, creates ongoing adaptation cost and resource demand. Failure to respond to regulatory changes in a timely manner could result in product obsolescence or client attrition.

The Company is required to continuously adapt and evolve their products and processes to remain aligned with changing regulatory expectations.

The Company keeps a close watch on key regulatory developments to track changes and their potential impact on its business.

ICRA continues to enhance its systems and processes to keep pace with the evolving regulatory environment and ensure compliance in a timely manner. The Company is investing in regulatory intelligence, including through its compliance tracking tools, to support timely identification and response to relevant regulatory developments.

(5) Client Concentration

The Companys KnowTech business currently derives a significant portion of its revenue from a single clients engagement. Changes in the clients automation strategy, internal priorities, or regulatory environment could adversely impact revenues and profitability.

To mitigate this risk, the Company is pursuing initiatives to diversify its revenue base by scaling other business verticals and expanding KnowTechs international footprint. These initiatives are supported by new product launches, selective inorganic initiatives, and deeper client engagement aimed at building a more diversified and sustainable global client base.

(6) Investment Risk

As part of its treasury and liquidity management activities, the Company invests in mutual funds, corporate deposits, and other marketable securities. Returns on such investments are subject to movements in interest rates and volatility in financial markets. Adverse market conditions may result in mark to market losses or lower investment income.

To mitigate this risk, the Company operates under a Board approved investment policy that prescribes eligible instruments, concentration limits, and risk parameters, supported by periodic monitoring and review of the investment portfolio.

(7) Regulatory and Compliance Risk

The Company operates in a complex and evolving regulatory environment, which may expose it to risks arising from changes in laws, regulations, and supervisory expectations. Non-compliance or delays in adapting to regulatory developments could have legal, financial, or reputational implications.

To mitigate this risk, the Company has established a structured compliance framework supported by technology tools to proactively track and monitor regulatory requirements.

The framework is reinforced through periodic effectiveness reviews, ongoing guidance from internal and external legal advisors, and regular training programmes for employees. Mandatory compliance assessments and governance oversight are used to promote adherence to policies, the Code of Conduct, and applicable laws.

(8) Talent Retention Risk

Attracting and retaining the top talent has been one of the key imperatives for ICRA. We continue to hire the top talent from the countrys best colleges and universities to create a healthy pipeline of talent. Job rotations within the company as well as inter-entity movements within Group ICRA also help us retain the top talent and align individuals career path with the organisations objectives. We recognize the top performers through internal and external social media posts to reinforce the positive behaviours in line with ICRA Values.

We constantly strive to create a strong employee value proposition for our employees by working on our compensation structure, introducing better benefits, launching Group ICRA employee newsletter and organizing more team-bonding initiatives like offsites, lunches etc. for enhanced collaboration. We are driven to achieve better employee experience by making our people processes more efficient with the use of technology.

Your Company is committed to its employees well-being and growth. We firmly believe that our most valuable asset is our workforce, and we have consistently implemented various human resource initiatives to ensure their professional and personal development

E. Internal Control Systems and their Adequacy

The Management is responsible for establishing and maintaining controls and procedures for the Company, following the review by the Audit Committee and the Board of Directors. Accordingly, the Management designed such controls and procedures or caused such controls and procedures to be designed under its supervision to ensure that material information relating to your Company, including its subsidiaries, is made known to the Management by others within those entities. It has also designed such internal control over financial reporting or designed such internal control over financial reporting under its supervision, to provide reasonable assurance regarding the reliability of the financial statements.

(An overview of Internal Control Systems and their adequacy, is presented in the section titled Internal Control System and their Adequacy in the Directors Report.)

F. Discussion on Financial Performance with respect to Operational Performance

The key features of your Companys financial performance for the year ended March 31, 2026 are presented in the accompanying financial statements, which have been prepared in accordance with the Indian Accounting Standards (referred to as IndAS) as prescribed under Section 133 of the Companies Act, 2013 (the "Act") read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act. The Companys Management accepts responsibility for the integrity and objectivity of these financial statements.

The financial information discussed in this section is derived from the consolidated financial results of the Company.

I. Results of operation

The financial performance of the ICRA is summarised below:

Particular	Consolidated (Rs in Lakhs)		Standalone (Rs in Lakhs)
	FY26	FY25	FY26	FY25
Revenue from operations	59,951	49,802	32,823	28,672
Other income	7,502	7,741	6,445	10,205
Total income	67,453	57,543	39,268	38,877
Total expenses	41,717	34,146	21,923	19,982
Profit before exceptional items and tax	25,736	23,397	17,345	18,895
Exceptional items	692	-	219	-
Profit before tax	25,044	23,397	17,126	18,895
Total tax expense	6,791	6,277	4,455	4,076
Profit after tax	18,253	17,120	12,671	14,819

a) Revenue from operation

ICRAs revenue grew by 20.4% to Rs59,951 Lakhs in FY26, reflecting solid performance across its core businesses. Growth was led by momentum in the Ratings business and expansion in Research & Analytics, supported by the acquisition of Fintellix, rising demand for risk- and compliance-related analytical solutions, improved execution of ongoing engagements, and favourable currency movements.

b) Other income

Other income comprises interest income on fixed deposits and investments, fair value gains on financial assets, and rental income. Other income declined by 3% in FY26 compared to FY25, primarily reflecting the deployment of surplus funds towards acquisition-related payouts, resulting in lower treasury income.

(c) Expenses

Expenses increased during FY26 primarily due to the acquisition of Fintellix for six months. Excluding this impact, the increase was driven by higher employee benefit costs on account of merit increase, along with higher operating expenses reflecting continued investments in technology and acquisition-related costs, aligned with the Companys strategic imperatives.

The segment operating profit reported above excludes the impact of onetime exceptional charge arising from the implementation of the new Labour Codes for better comparability. Group Segmental operating profit increased by 18 % to Rs19,087 Lakhs, primarily driven by strong performance in the Ratings business and acquisition of Fintellix. The Research & Analytics segments operating profit margins reflects the shift in revenue mix with increased contribution coming from BankTech businesses.

II. Property, plant and equipment and Intangible assets

Property, plant and equipment primarily comprise office equipment, leasehold improvements, and technology infrastructure, and are measured at cost less accumulated depreciation and impairment, if any.

Right-of-use assets mainly relate to leased office premises, while intangible assets include software, platforms and goodwill arising on acquisitions. These are carried at cost less amortisation and impairment, if any.

Increase in intangible assets during the year is primarily on account of acquisition of Fintellix, resulting in recognition of identifiable intangibles, along with ongoing investments in technology.

At the end of the year, the investments in property, plant and equipment, right-of use assets and intangible assets were as follows:

Particular	FY26	FY25	Growth %
Property, plant, equipment etc	6,637	6,305	5%
Less accumulated depreciation	3,667	3,380	8%
Net Block	2,970	2,925	2%
Right-of-use assets - Buildings	3,515	2,899	21%
Less accumulated depreciation	1,894	1,779	6%
Net Block	1,621	1,120	45%
Intangible assets	12,807	3,270	292%
Less accumulated depreciation	2,708	1,370	98%
Net Block	10,099	1,900	432%
Intangible assets under development	223	351	-37%

a) Goodwill on consolidation

Goodwill on consolidation represents the excess of purchase consideration over the net asset value of acquired entities on the date of such acquisition. Goodwill is tested for impairment annually, or more frequently if there are indications of impairment. For goodwill impairment testing, the carrying amount of the cash generating units (CGUs) is compared with recoverable amount of CGU by the Group.

III. Financial assets

Financial assets mainly consist of investments, loans, trade receivables, cash and cash equivalents, bank balances and interest accrued on deposits etc.

b) Other financial assets: Other financial assets include trade receivables, other contract assets, loans, security deposits etc. Trade receivables accounted for 13% of revenue in 2026, compared with 10% in the previous year.

Rs in Lakhs

Particular	FY26	FY25	Growth
Trade receivables	7,841	4,759	65%
Others	2,070	1,334	55%
Total	9,911	6,093	63%

IV. Equity

(a) Equity share capital

ICRA has only one class of equity shares having a par value of Rs 10 each. The issued, subscribed and paid-up capital stood at C965 Lakhs into 96,51,231 equity shares of Rs 10 each.

(b) Other equity

Other equity comprises reserves and surplus and Other Comprehensive Income (OCI). It totaled Rs 117109 Lakhs as at March 31, 2026, as against Rs 104,358 Lakhs in the previous year.

During the year FY2026, the Group granted additional 6,149 options to eligible employees. The options would be vested as defined in the Scheme.

V. Financial liabilities

Financial liabilities primarily comprise lease liabilities, trade payables, and other contractual obligations arising in the normal course of business. The increase during FY26 reflects business expansion, including the acquisition of Fintellix.

Rs in Lakhs

Particulars	FY26	FY25	Growth
Lease liability	1,778	1,198	48%
Trade payables	1,381	911	52%
Others	10,620	10,070	5%
Total financial liability	13,779	12,179	13%

*As part of the acquisition of D2K Technologies India Private Limited, the Group has committed to buy-out the balance 40% equity shares from the remaining shareholders. Accordingly, Rs 3,879 Lakhs have been recognised by the Group as deferred consideration.

VI. Other liabilities and provisions

Other current liabilities consist of unearned revenue, statutory dues payable and customer advances. The increase of 18% as on March 31, 2026 was primarily driven by the acquisition of Fintellix.

Provisions include employee-related liabilities such as gratuity, compensated absences, and variable pay.

VII. Key financial ratios

Key financial ratios are provided in the table below.

Particular	FY26	FY 25
Debtor turnover (no of days)	38	36
Current ratio	3.8	6.4
Operating profit margin (%)	30%	31%
Net profit margin (%)	30%	34%
Return on net worth (%)	15%	16%

Material Developments in Human Resources/Industrial Relations, including Number of People Employed

ICRA Group, with a total employee strength of 1,626 as at FY26, continues to accord high priority to human resource development, with emphasis on improving skill, competence and knowledge through regular virtual/online training and in-house/external professional development programmes.