KEN Financial Services Ltd Management Discussions

Overall Review

Ken Financial Service Limited (‘KFSL or ‘the Company) is a non-systemically important non-deposit 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.

Indias NBFC sector is on a sustained growth trajectory, with assets under management (AUM) expected to surpass 50 Lakh Crore in FY 2026-27 excluding government-owned NBFCs, as per CRISIL Ratings. NBFC credit growth has historically outpaced Indias GDP growth and this trend is expected to continue. The AUM growth trajectory reflects both its expanding relevance and demonstrated resilience within Indias financial ecosystem.

For FY 2025-26, the credit growth of NBFCs is estimated at 16.7% year on year, a slight moderation from 18.4% in FY 2024-25. Amid declining interest rates, NBFCs faced intense pricing competition from banks, particularly in housing, auto and MSME loans. However, NBFCs gained significant ground in the consumer durable segment, with their market share surging to 59% in FY 2025-26.

While banks remained dominant in wholesale lending, NBFCs leveraged rising disposable income and rate cuts to drive retail expansion. The near-term outlook remains constructive. For FY 2026-27, momentum is expected to gain further pace in specialised segments like Consumer Durable financing, with NBFC market share projected to reach 63%. Growth trajectories will nonetheless vary across segments, shaped by risk calibration, regulatory oversight and funding access. Balance sheet strength and funding diversification remain the critical differentiators.

Industry Structure and Development

The credit momentum was underpinned by a banking system in robust health. Gross NPAs of the scheduled commercial banks continued to decline, reaching multiyear lows of around 2.0% by the end of FY 2025-26 and capital adequacy remained at comfortable levels, providing adequate buffers to support growth. Improved asset quality trends and stronger provisioning coverage contributed to a healthier credit environment. Capital markets also witnessed strong mobilisation, reflecting deepening financialisaton of household savings and diversified funding avenues for NBFCs and corporates. Stable funding access, diversified liability profiles and prudent asset-liability management remain critical considerations for NBFCs as the rate cycle evolves. On the fiscal side, the government maintained its consolidation trajectory without sacrificing growth-oriented expenditure.

The fiscal deficit remained aligned with the medium-term glide path, while effective capital expenditure held at around 4% of GDP, reinforcing infrastructure creation across roads, railways, logistics, renewable energy and urban development. GST collections remained remarkably buoyant, exceeding 20 Lakh Crore for the full financial year FY 2025-26, reflecting formalisation and stable economic activity.

The Union Budget FY 2026-27 sustained capital expenditure at approximately 12.2 Lakh Crore, while strengthening MSME credit guarantee frameworks, digital infrastructure and skilling initiatives. These measures are structurally positive for credit demand, entrepreneurship and employment generation. Externally, India demonstrate resilience even as global trade conditions became more complex. Indias diversified export base and strong domestic demand reduce vulnerability to external shocks, even as global trade fragmentation and geopolitical developments remain key risks.

SWOT ANALYSIS Strengths

- One of the best customer franchises,

- 18-year track record of tailored lending across Enterprise Lending, Asset Finance and Consumer Finance segments, with a deep understanding of local nuances across India.

- Robust credit underwriting and collection capabilities enabling competitive risk- adjusted returns for customers with minimal or no credit history.

Weaknesses

- Exposure to economically sensitive segments such as commercial vehicles and MSME lending creates higher sensitivity to economic cycles and asset quality fluctuations.

- Higher credit costs during periods of portfolio stress.

Opportunities

- Rising credit demand in Tier 2, 3 and rural markets.

- Cross-sell potential through the existing customer base to a wide range of products and services.

- Growth in secured lending including LAP and gold loans.

- Growing digital adoption enabling cost efficiencies and wider reach.

Threats

- Regulatory tightening for NBFCs impacting capital and compliance requirements.

- Competitive intensity from banks, fintechs and other NBFCs.

- Macroeconomic volatility affecting borrower cash flows and asset quality.

- Interest rate fluctuations impacting spreads and funding costs.

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.

Segment-wise/Product-wise Performance

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. 5,98,108/- hundreds in comparison to Rs. 59,888/- hundreds during the previous year.

Outlook

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.

Risk and Concern

Non-banking financial companies (NBFCs) in 2025-2026 face heightened earnings pressure, stringent regulatory tightening by the Reserve Bank of India, and increasing asset quality stress in unsecured retail segments.

Key Risks and Concerns

Regulatory Tightening and Compliance Overhauls

• Flexi-Loan and Revolving Credit Curbs: Proposed RBI rules target revolving credit and flexi-loan structures, creating concerns over potential product disruptions for loans against shares, mutual funds, and digital personal loans.

• Scale-Based and Upper Layer Reclassifications: New asset size thresholds (such as Rs.1,000 crore for unregistered definitions and Rs.1 lakh crore for upper-layer classifications) subject major NBFCs to tighter capital exposure and governance norms.

• Stressed Asset Sales: Effective October 2026, lenders face bans on selling acquired stressed assets back to defaulting borrowers or related entities.

• IT Outsourcing and Cyber Norms: Strict operational mandates now hold boards responsible for third-party outsourcing breaches (with a six-hour reporting window) and require annual IS audits for large entities.

Margin and Funding Pressures

• Elevated Funding Costs: Continued high interest rates and expensive bank borrowings squeeze profit margins and narrow earnings buffers, particularly for MSME-focused NBFCs.

• Uneven Profitability: Sector profitability (ROA) is expected to moderate to roughly 2.2-2.4% amid elevated credit and operational costs.

Internal Control System

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.

Financial Performance with respect to Operational Performance

During the year under review, the Company has earned Total Income of Rs. 5,98,108/- hundreds in comparison to Rs. 59,888/- hundreds during the previous year. The Total Expenses have been increased from Rs. 48,524/- hundreds to Rs. 5,36,354/- hundreds incurred during the year under review. The Net Profit after tax 43,352/- hundreds in comparison with Rs.8,372/- hundreds during the previous year. Your Directors are of the opinion that the Company is well placed to perform better in the forthcoming F.Y. 2026-27.

Safety, Health and Environment

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

Human Resources

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".

Key Financial Ratios:

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.

Particulars	F.Y. 2025-26	F.Y. 2024-25
Debt equity Ratio 1	1.15 times	0.32 times
Net Profit Margin (%)2	7.25%	13.98 %
Return on Networth (%)3	5.63%	1.15 %

1 The debt-to-equity ratio increased from 0.32 times to 1.15 times during the year, mainly on account of larger borrowings drawn to fund growth in the loan book..

2 Net Profit Margin declined from 13.98% to 7.25% during the year, as growth in expenses (including finance costs on the higher borrowings) outpaced the growth in income on a proportionate basis, notwithstanding an increase in absolute Profit After Tax.

3 Return on Networth improved from 1.15% to 5.63% during the year, driven by growth in profitability.

Cautionary Statement

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.