KEN Financial Services Ltd Management Discussions

Overall Review

Ken Finance Service Limited (‘KFSL or ‘the Company) is a non-systemically important nondeposit taking non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI) since March 24, 1998, with registration number 13.00423 and classified as NBFC- Investment and Credit Company (NBFC-ICC) pursuant to circular DNBR (PD) CC.No.097/03.10.001/2018-19 dated 22 February 2019. The Company is mainly engaged in the business of financing. The Company has a diversified lending portfolio across retail, SMEs and commercial customers with significant presence in urban and rural India..

NBFCs plays a vital role in the Indian financial market, providing a range of financial services. Indias NBFCs continue to be instrumental in driving credit growth for the countrys underserved segments. In the last few years, the contribution of NBFCs to Indias gross domestic product (GDP) was well above 10% and these entities now account for more than 25% of credit, thus NBFCs role in driving consumption, investment, and financial inclusion make them a vital component of the countrys economic engine.

The RBI has estimated real GDP growth for FY2025 at 6.5%. It has projected growth at the same percentage rate for FY2026; and has forecast CPI inflation at 4%. With no imminent fear of inflation, the RBIs Monetary Policy Committee, in its first meeting of FY2026, unanimously decided to reduce the policy repo rate by 25 basis points, bringing it down to 6 per cent with immediate effect.

Therefore, as it stands, the Indian economy seems to be in a good place. At 6.5%, it continues to clock the highest real GDP growth rate among all major countries in the world, including China. Both wholesale and consumer price inflation are under control. The central bank has been confident enough to reduce the repo rate and inject further liquidity into the system. A key concern remains the recent escalation of US tariffs and policymakers will have to watch this very carefully in the coming months. Even so, it is probably fair to say that India can expect another excellent year of growth and income generation.

Lending and borrowing money are critical to a countrys financial health. Banks traditionally played the role of prime lenders in India, disbursing loans for both commercial and personal purposes. However, extensive due diligence and long processes resulted in individuals turning to the unorganised sector or traditional moneylenders who charged exorbitant interest rates.

In recent years, however, the lending market in India has developed into a dynamic playfield of various non-banking financial companies (NBFC), fintech enterprises and digital lending platforms.

Indias NBFCs continue to be instrumental in driving credit growth for the countrys underserved segments. In the last few years, the contribution of NBFCs to Indias gross domestic product (GDP) was well above 10% and these entities now account for more than 25% of credit, thus NBFCs role in driving consumption, investment, and financial inclusion make them a vital component of the countrys economic engine.

NBFCs are critical to Indias financial ecosystem, particularly in underserved segment such as rural and semi-urban areas where banks have limited reach. Their importance lies in:

• Financial inclusion: By providing credit to underserved regions.

• Faster services: With simplified processes and doorstep delivery.

• Priority sector lending: Addressing credit needs in agriculture, microfinance, and other unorganised sectors.

• Economic growth: Supporting sectors like housing, infrastructure and small enterprises through financing.

There are lot of opportunities and wide range of financial services offered by NBFCs which includes:

• Personal loans

• Leasing and hire-purchase services

• Investment and asset management services

• Home loans

• Credit card services

• Vehicle loans

• Microfinance

• Insurance services

• Gold loans

Further Government of India has exempted NBFCs from the hard rules and regulations which are mandatory for the traditional banks, keeping in mind the financial needs of the people. NBFCs get to enjoy flexibility in the rules for paperwork and other restrictions due to which many entrepreneurs put their interest in these financial institutions. Government of India has provided many opportunities for the establishment of NBFCs in the Indian market. The NBFCs are eligible for a foreign investment of up to 100%.

NBFCs are contributing to Indias GDP by facilitating credit access, supporting investment, and contributing to various sectors. The diverse range of services offered by NBFCs have contributed to the overall growth and resilience of the Indian economy. This is why the Indian Government has taken many initiatives to protect the interests of NBFCs and help them to emerge. NBFCs are in the business of profit. The contributions made by the NBFCs in the growth of the Indian economy highlights how well NBFCs have been functioning.

Asset Quality and Credit Risk: NBFCs face challenges related to asset quality and credit risk, especially during economic downturns or in sectors prone to volatility. Poor risk management practices can lead to asset quality deterioration and increase the likelihood of defaults.

The Company is engaged mainly in business of financing and as such there are no other reportable segment. The revenue for the year was Rs.59,888/- hundreds in comparison to Rs.58,007/- hundreds during the previous year.

NBFCs remain a cornerstone of Indias financial system, particularly to promote financial inclusion and economic growth. They can address the credit needs of underserved segments, leverage new sources of funds and embrace technological advancements. By integrating these strategies, NBFCs play a pivotal role in driving universal and sustainable economic growth, and ensure that the benefits of financial inclusion and technological innovation are widely shared across the nation.

• Higher risk weights: Increased risk weights for loans from banks to NBFCs, making bank borrowing more expensive. However, effective 1 April 2025, the RBI has rolled back the higher risk weights previously assigned, and restored these to the pre-November 2023 levels.

• Funding constraints: Smaller NBFCs with lower credit ratings face a fund crunch due to rising borrowing costs and limited financing / refinancing options.

• Shallow bond market: Indias debt market lacks depth and liquidity, limiting access to diversified domestic funding.

• Cost pressures: Rising credit costs may affect NBFCs profitability.

• Overseas borrowing challenges: While attractive due to reduced hedging costs, overseas funding is still at a nascent stage for many NBFCs.

KFSLs has in place adequate system of internal control. It has documented procedures covering all financial and operating functions. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls, monitoring of operations, protecting assets from unauthorized use or assets, compliance with regulations and for ensuring reliability of financial reporting.

The company had continued its efforts to align all its processes and controls with best practices in these areas as well.

During the year under review, the Company has earned Total Income of Rs. 59,888/- hundreds in comparison to Rs.58,007/- hundreds during the previous year. The total expenses have been increased from Rs.46,544/- hundreds to Rs.48,524/- hundreds. The Net Profit after tax is Rs.8,372/- hundreds in comparison with Rs. 7,682/- hundreds during the previous year. Your directors are of the opinion of performing better in forthcoming F.Y. 2025-26.

Your Company as a matter of policy gives greater importance to safety, health and environment and also ensures compliance with applicable legislative requirements.

The Company firmly believes that Human Capital is its most important asset. A series of engagement interventions across identified key themes were undertaken to increase employee morale and the initiatives focused on key aspects such as physical and mental wellness, celebrations, continuing with its journey of “Happiness at the workplace”.

In accordance with the SEBI (Listing Obligations and disclosures Requirements) Regulations 2018 (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in Key sector-specific financial ratios.

1 The debt-to-equity ratio remains low, reflecting a conservative approach to leverage.

2 Net Profit Margin has increased as a result of improved business structure of the Company.

3 Return on Networth has improved as a result of overall business improvement.

The report contains forward looking statements describing expectations, estimates, plans or words with similar meaning. Your Companys actual result may differ from those projected depending on various factor. Your Company cannot guarantee that the assumptions and estimates in the forward-looking statements are accurate or will be realized.