Indo Credit Capital Ltd Management Discussions

We submit herewith the "Management Discussion and Analysis Report" on the business of the Company as applicable to the extent relevant.

INDUSTRIAL SCENARIO NBFC SECTOR IN INDIA

NBFCs have emerged as a critical pillar of Indias credit delivery mechanism, especially for segments underserved by banks such as MSMEs, microfinance borrowers, infrastructure projects, vehicle finance, and consumer lending. As per an updated Industrial Scenario for NBFCs in India based on the latest RBI Financial Stability Report

(June 2025) and Department of Economic Affairs updates, NBFCs (including Housing Finance Companies) now account for over 16% of total financial system assets and represent 99% of the countrys shadow banking sector. They complement banks by offering niche, customised, and regionally targeted products, leveraging superior field-level understanding and digital integration. Credit Stock Growth: According to CRISIL MI&A data (quoted in DEA report), NBFC credit to small businesses has risen from 5.3 lakh crore in FY19 to over 9.5 lakh crore in FY24, with market share in small business lending increasing from 24% to 35%, projected to touch 38% by FY26. NBFC sector credit is expected to expand at 15 17% CAGR during FY24 FY27, driven by retail loans, MSME lending, and infrastructure finance. Asset Under Management of NBFCs is steadily rising, with vehicle finance, gold loans, and personal loans being key growth areas. Above the minimum requirement across the sector, indicating strong capital buffers. Gross NPAs for NBFCs declined to ~5.4% in March 2025 from higher pandemic levels, showing improved risk management. Return on Assets (RoA) and Return on Equity (RoE) remain healthy, supported by higher net interest margins.

IMFs Financial Sector Assessment Program (FSAP) confirms that NBFCs have weathered recent macroeconomic pressures well. NBFCs are increasingly using AI-based underwriting, alternate credit scoring, and digital KYC to speed up loan approvals. Under the revised RBI framework (effective Jan 2026), co-lending arrangements will involve minimum 10% loan retention by NBFCs, enhancing transparency and risk-sharing. NBFCs are expanding into unsecured personal loans, renewable energy financing, and supply chain finance.

POLICY & REGULATORY LANDSCAPE

Scale-Based Regulation: Introduced in October 2021, classifies NBFCs into Base, Middle, Upper, and Top Layers, with progressively tighter oversight.

Industry bodies (e.g., FIDC) have urged the government to create a refinance/liquidity window via SIDBI and raise the bank lending limit to NBFCs under Priority Sector Lending from 5% to 10%. In January 2025, RBI began unwinding restrictions on major NBFCs after compliance improvements.

The NBFC sector is positioned for sustained double-digit growth in the medium term, supported by digital adoption, government policy support, and underserved market penetration.

The sectors systemic significance means it will remain under close regulatory watch, but reforms (co-lending, capital norms) are expected to make it more resilient and competitive.

OPPORTUNITIES, THREATS, CHALLENGES AND OUTLOOK: Opportunities

NBFCs have served the unbanked customers by pioneering into retail asset-backed lending, lending against securities and microfinance. Following variables in the external environment may be seen as opportunities for the Company:

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• The sector has witnessed moderate consolidation activities in recent years, a trend expected to continue in the near future.

New RBI guidelines on NBFCs with regard to capital requirements, provisioning norms & enhanced disclosure requirements are expected to benefit the sector in the long run.

Government and RBI initiatives (such as Jan Dhan Yojana, Digital India, and priority sector lending) continue to promote credit access in semi-urban and rural areas where NBFCs already have a strong presence.

MSME credit demand is growing at a CAGR of over 15%, with NBFCs market share in small business lending expected to touch 38% by FY26 (CRISIL MI&A data, DEA report).

• Adoption of AI-based credit assessment, e-KYC, and digital disbursement allows NBFCs to scale faster and reduce costs.

The revised RBI co-lending framework (effective January 2026) enables NBFCs to share risk and funding costs with banks, improving margins and loan book diversity.

Opportunities in renewable energy finance, supply chain finance, affordable housing, and unsecured personal loans.

• Inclusion in systemic risk assessments and IMF FSAP acknowledgment of sector resilience boosts investor confidence.

Threats

Being a NBFC, the Company has to face various threats as under mentioned –

Unlike banks, NBFCs cannot accept low-cost demand deposits and depend on bank borrowings or market instruments.

• Rapid changes in monetary policy can compress spreads and increase funding costs.

Intensifying competition from fintechs, payment banks, and aggressive bank lending in retail and SME segments.

• Convergence of NBFC norms with bank regulations on capital adequacy, provisioning, and disclosure may pressure smaller NBFCs.

• Overexposure to high-risk borrower categories could raise NPAs if macro conditions deteriorate.

• Economic slowdown, currency volatility, and geopolitical events could dampen credit demand.

Challenges

Despite easing of pandemic-era stress, smaller NBFCs still face liquidity buffers.

• The Scale-Based Regulation framework requires stronger governance, risk management, and capital, increasing operational costs.

• MaintaininglowNPAsinthefaceofrapidloangrowthrequiresstrongerunderwritingandrecoverymechanisms.

• As switching costs are low, NBFCs must continuously innovate in service delivery to retain clients.

While digital adoption offers opportunities, it also brings cyber security risks and the need for substantial IT investment.

Outlook:

The sector is projected to maintain 15 17% credit growth CAGR between FY24 and FY27, driven by MSME lending, retail finance, and co-lending models. With RBIs co-lending norms, capital enhancement requirements, and relaxation of earlier restrictions on major NBFCs, the sector is moving toward a more resilient and transparent framework. NBFCs role in bridging the credit gap, especially in underserved markets, will keep them central to

Indias financial ecosystem. Strong demand, technological advancement, and policy support point to sustained growth, although profitability will hinge on effective cost control, prudent risk management, and diversification.

DISSCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial statements have been prepared in accordance with the requirements of the Companies Act, 2013 and applicable accounting standards issued by the Institute of Chartered Accountants of India. The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Accounts and other financial statements forming part of this annual report.

INTERNAL CONTROL SYSTEM

Given the magnitude and nature of its business, the Company has maintained sound and commercial practice with an effective internal control system. The system ensures that all transactions are authorized, recorded and reported correctly to safeguard the assets of the Company and protect them from any loss due to unauthorized use or disposition. The adequate internal information system is in place to ensure proper information flow for the decision- making process. The Company also has well-established processes and clearly defined roles and responsibilities for people at various levels.

The control mechanism also involves well documented policies, authorization guidelines commensurate with the level of responsibility and standard operating procedures specific to the respective businesses, adherence to which is strictly ensured. Internal audit is carried out frequently to create awareness and to take corrective actions on the respective units or areas, which need rectification. These reports are then reviewed by the "Management

Team" and the "Audit Committee" for follow-up action.

HUMAN RESOURCE DEVELOPMENT

The Company regards its human resources as amongst its most valuable assets and proactively reviews policies and processes by creating a work environment that encourages initiative, provides challenges and opportunities and recognizes the performance and potential of its employees attracting and retaining the best manpower available by providing high degree of motivation.

Your Company believes in trust, transparency & teamwork to improve employees productivity at all levels.

CAUTIONARY STATEMENT

The management discussion and analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.

For & on behalf of the Board of Director

For Indo Credit Capital Limited

 

Sd/-

Ramkaran Saini

Whole Time Director

DIN: 00439446

Date: 22nd July, 2025

Place: Ahmedabad

 

Registered Office:

304 Kaling, Near Mt. Carmel School,

B/h. Bata Show Room,

Ashram Road, Ahmedabad 380009

E-mail: indocredit@rediffmail.com

Phone: 079-26580366

Website: www.indocreditcapital.com