KIFS Financial Services Ltd Management Discussions

I. Industry structure and developments

KIFS Financial Services Limited (‘KIFS or ‘the company) is registered with the Reserve Bank of India as a non- banking financial company - investment and credit company (NBFC-ICC). As per RBIs ‘scale based regulations (SBR), the company is classified as NBFC - base layer (NBFC-BL).

Indias economic outlook for the financial year 2025-26 (FY 2026) remains resilient, although GDP growth is expected to moderate reflecting a slight easing from the stronger growth momentum witnessed in recent years. The economy is expected to continue benefiting from robust domestic demand, improving investment activity, and ongoing structural reforms.

The Indian Non-Banking Financial Company (NBFC) sector continued to play a pivotal role in expanding credit access, supporting financial inclusion, and meeting the financing needs of underserved segments of the economy. During FY 2025-26, the sector witnessed sustained growth driven by increasing demand for retail credit, digital lending adoption, government infrastructure initiatives, and improving economic activity.

The Reserve Bank of India (RBI) continued its focus on strengthening governance, risk management, customer protection, and regulatory compliance within the NBFC ecosystem. Enhanced supervisory oversight and evolving regulatory frameworks encouraged stronger capitalization, prudent lending practices, and improved operational resilience.

Despite global economic uncertainties, inflationary pressures, and evolving interest rate dynamics, the Indian economy demonstrated resilience, creating favorable opportunities for NBFCs to expand their lending portfolios while maintaining asset quality.

Fiscal management remained a key priority for the Government in FY 2025-26, with continued emphasis on capital expenditures as a central pillar for sustaining economic growth and strengthening long-term productive capacity. The real gross fixed capital formation (GFCF) in India continued to demonstrate healthy growth momentum during FY 2025-26, reflecting sustained investment activity across key sectors of the economy. As a critical indicator of economic growth and business confidence, GFCF measures investments in fixed assets and provides insights into the economys productive capacity and long-term growth potential.

II. Opportunities and threats

Opportunities

Non-Banking Financial Companies (NBFCs) are fast emerging as an important segment of Indian financial system. The Company believes significant opportunities exist in the following areas:

• Greater focus on corporate governance and prudent practices in line with the target segment

• Growing digital adoption enabling cost efficiencies and wider reach

• Adapting to regulatory and compliance shifts impacting the NBFC sector

• Addressing external risks related to liquidity strain, political uncertainties and fiscal instability

• Companys excellent customer service and strong experience and brand recognition

• Continuing demand of working capital

• Government initiatives for startups

• Growing digitalization and analytics

• Economic Upliftment

• Low retail penetration of financial services / products

• Strong managerial capabilities

• Integration of various financial services in the group

Threats

Being an NBFC, the Company operates in a competitive and regulated environment and has to face various threats as under mentioned:

• Stringent regulation of NBFCs

• Global economic slowdown

• Liquidity management challenges

• Market fluctuations

• Interest rate volatility

• Impact of unforeseen natural events / climate conditions

• Stiff competition from banks, fintech companies, and other NBFCs

• Volatility of economic cycle

• High cost of funds

The Company continuously monitors these risks and implements appropriate mitigation measures.

III. Segment-wise / product-wise performance

The company is engaged into a single segment of finance and thus separate segment wise performance details arent given. Income from interest on loans stands at Rs. 3,599.44 lakhs in compare to Rs. 2,911.86 lakhs for the previous financial year. Profit before tax has been decreased by 0.70% i.e. from Rs. 1,083.76 lakhs to Rs. 1,076.17 lakhs during the financial year under report.

IV. Outlook

According to ICRA, the Non-Banking Financial Company (NBFC) sector is expected to face certain challenges relating to funding availability and liquidity conditions, which is likely to impede growth vis-a-vis the robust expansion in the last two fiscals. Nevertheless, entities with strong governance frameworks, prudent risk management practices, diversified funding sources, and robust asset quality are expected to remain well positioned to navigate these challenges and capitalize on emerging business opportunities.

According to RBI, NBFCs have expanded their reach, particularly in underserved regions, witnessing credit growth driven by unsecured loans and MSME lending. The companys consistent growth, innovative approach, and robust financial health make it an attractive proposition. Looking ahead, the companys focus remains on expanding its digital footprint and empowering its digital infrastructure to optimise processes and elevate efficiency.

Furthermore, NBFCs ability to provide lower transaction costs, innovative products, quick decision-making backed faster turnaround, customer centric approaches, and prompt service standards differentiate them from traditional banks. Considering the reach and expanse, NBFCs, are well-suited to bridge the financing gap in a large country like India.

V. Risks and concerns

The risk management strategy of your company is based on specific risks that are particular to its business and the environment within which it operates, including interest rate volatility, economic cycle, credit and market risks. Risk is an integral part of the business and almost every business decision requires the management to balance risk and reward. For the company, risk management forms an integral part of the business operations and monitoring activities. The risk is managed through risk management framework approved by the risk management committee established by the board, considering adequate practices for identifying, measuring, monitoring, reporting, mitigating and managing of various risks- business, strategic, operational, market, credit, liquidity, reputational and process risks for the business operations and activities of the company.

The risk management oversight structure includes committees of the board and senior management. KIFS recognizes that the risks need to be managed to protect its customers, employees, shareholders and other stakeholders, to achieve its business objectives and to enable the sustainable growth. Although the board recognizes presence of these risks, but there are no risks which in the opinion of the board threaten the existence of the company. On-going monitoring by the management helps in identifying the risks at an early stage. Experience team members identify and monitor these risks on an on-going basis and control the same to keep the risks to minimum levels.

VI. Internal control systems and their adequacy

In any industry, the processes and internal control systems play a critical role in the health of the Company. The Companys well-defined organizational structure and adequate system of internal control in all spheres of its activities to ensure that all its assets are safeguarded and protected against loss from unauthorized use or disposition and that the transactions are authorized, recorded and reported diligently. The internal control is supplemented by an effective internal audit being carried out by an external firm of chartered accountants. The company ensures adherence to all internal control policies and procedures as well as compliances with all regulatory guidelines. The audit committee of the board of directors reviews the adequacy of internal controls. Systems of internal controls are designed to provide reasonable assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls and compliance with applicable laws and regulations.

The main purposes of the internal control systems are:

• being constantly updated with new / revised standard operating procedures;

• to ensure the highest standards of integrity and transparency in its operations;

• to ensure operational efficiency, compliance with internal policies, laws and regulations, as well as the protection of resources;

• a strong corporate governance structure;

• assurance about the fact that the transactions are recorded in proper manner and under proper heads;

• conducting business efficiently;

• automatic and independent checking of transactions so as to ensure their validity;

• to check and assure the compliance of various enactments like corporate laws, tax laws etc.;

• to prevent and early detection of frauds and malpractices, if any; and

• to ensure timely preparation of reliable financial information.

The internal control system is supplemented by an extensive program of internal audit and reviews by the senior management. Adherence to these processes is ensured through frequent internal audits to assess and improve the effectiveness of risk management, control, operations and processes. To ensure independence, the internal audit function has a reporting line to the audit committee of the board. The management regularly reviews the findings and recommendations of the internal auditors so as to continuously monitor and improve internal controls to match the organizations pace of growth and increasing complexity of operations as well as to meet the changes in statutory and accounting requirements.

The audit committee of the board reviews the performance of the audit and the adequacy of internal control systems and compliance with regulatory guidelines. Significant deviations are brought to the notice and corrective measures are recommended for implementation. The audit committee provides necessary oversight and directions to the internal audit function and periodically reviews the findings and ensures corrective measures are taken. This system enables us to achieve efficiency and effectiveness of operations, reliability and completeness of financial and management information and compliance with applicable laws and regulations.

VII. Financial performance with respect to operational performance

The overall financial performance of the company during the financial year ended on March 31, 2026 is simplified in tabular form as under:

Sr. no.	Particulars	March 31, 2026 (Rs. in lakhs)	March 31, 2025 (Rs. in lakhs)
1	Revenue from operations	3,599.44	2,911.86
2	Profit before interest, depreciation and tax	3,441.79	3,252.51
3	Depreciation	28.03	46.55
4	Finance cost	2,337.58	2,122.20
5	Tax	277.59	277.24
6	Profit after tax	798.58	806.52
7	Net profit margin (%)	22.19	27.70
8	EPS (basic and diluted) (amount in ?)	7.38	7.46

VIII. Human resources / industrial relations

At KIFS, our people are our core asset, and they remain at the heart of our strategy. The company has established a robust human resources (‘HR) system that nurtures a high performing, conducive and inclusive work culture. In an environment that is rapidly becoming technology and digital oriented, your company continues to stay focused on providing an enriching work environment to our team by fostering a value driven culture and to invest in long term people development, skill enhancement, leadership building, and performance management initiatives. We promote an atmosphere of inclusion, by encouraging the next level of employees to take higher responsibilities.

The company strongly believes that its human resources are critical to its success and carrying forward its mission. With their sustained, determined and able work efforts the company has been able to cruise smoothly through the hard time of the economic volatility and rapidly changing market conditions. By creating conducive environment for career growth, company always tries to achieve the maximum utilization of employees skills in the most possible way. Board of directors thanks all of the employees for their valuable contribution towards the growth of the company.

Additionally, there were no cases of sexual harassment of woman at work place. Also, there are no instances of child labour / forced labour / involuntary labour and discriminatory employment during the year.

There are 6 employees employed by the company on payroll as on March 31, 2026. Industrial relations throughout the year continued to remain very cordial and satisfactory.

IX. Key financial ratios

Key indicators	2025-26	2024-25	Change (%)	Reason for change
PBT / total income (%)	29.90	32.68	(8.51)	Increase in finance cost as well as impairment on financial instruments i.e. provisions related to standard assets
PBT / total assets (%)	2.39	2.75	(13.09)	Increase in total assets as amount of loans and advances granted by the company increased
Interest coverage ratio (x) (EBIDTA / Interest)	1.47	1.53	(3.92)	Increase in finance cost
Debt / equity (x)	6.02	5.82	3.44	Increased borrowings by the company
Net profit margin (%)	22.19	27.70	(19.89)	Due to increase in finance cost and overall expense
Return on net worth (%)	12.60	14.15	(10.95)	Increase in net worth; however profit for the year remained affected due to increase in finance cost and overall expenses

Profit before tax (%) in the proportion of total income has shown down trend of 8.51% as compared to that of last year due to increase in finance cost as well as impairment on financial instruments i.e. provisions related to standard assets. Total expenses including finance cost have been increased by 13.06% as the financial cost has also been increased and thus profit before tax stands at Rs. 1,076.17 lakhs compared to Rs. 1,083.76 lakhs for previous financial year which shows fall of 0.70%. Net profit margin stands at 22.19% as compared to 27.70% for the previous financial year ended on March 31, 2025.

Cautionary statement

Statements in this management discussion and analysis report describing the companys objectives, projections, outlook, expectations, estimates and predictions may be “forward-looking statements” within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward looking statements contained in this document whether expressed or implied, due to various risks and uncertainties. These risks and uncertainties include the effect of climatic, economic and political conditions in India, volatility in interest rates, regulatory developments, market dynamics, new regulations and government policies that may impact the companys business as well as its ability to implement the strategies. The company does not undertake to update these statements.

For and on behalf of the board of directors

KIFS Financial Services Limited

Rajesh P. Khandwala

(Chairman & managing director)

(DIN: 00477673)

Ahmedabad, August 13, 2026