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 no 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).

In financial year 2024-25 (FY 2025) the Indian economy showed remarkable resilience and growth, amidst a challenging global landscape. The year witnessed a real GDP growth estimated by 6.5% to 7% in FY 2025 in according to the economic survey, 2024 driven by robust domestic demand and substantial improvements in industrial and service sectors.

ICRA highlighted that the non-banking financial companies (NBFCs) shall witness headwinds related to funding availability, which is likely to impede growth vis-a-vis the robust expansion in the last two fiscals. The credit growth of the non-banking financial companies (NBFCs) is expected to ease to 13-15 per cent in financial year 2025 (FY25) and FY 2026 from the 17 per cent in the previous two fiscals, rating agency ICRA said in a report.

The resilience and strength of the Indian economy, coupled with reforms implemented in recent years, have laid a strong foundation for sustaining a strong growth rate in the future.

Fiscal management remained a priority of the Government, with a concerted focus on capital expenditures. The real gross fixed capital formation (GFCF) in India grew by 10.2% year-on-year for the first nine months of the fiscal year 2025 (9M FY 2025). GFCF is a crucial indicator of economic growth and business confidence, as it reflects the level of investment in an economy.

II. Opportunities and threats

To carry success story forward, the organization needs to evaluate the opportunities & threats and synchronize its plans with them.

Opportunities

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

• 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

• Underserved retail sector

• Low retail penetration of financial services / products

• Strong managerial capabilities

• Integration of various financial services in the group

Threats

The company believes to be exposed to the following type of risks:

• Stringent regulation of NBFCs

• Global economic slowdown

• Market fluctuations

• Interest rate volatility

• Impact of unforeseen natural events / climate conditions

• Stiff competition within the NBFCs and banking sectors

• Volatility of economic cycle

• High cost of funds

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 2,911.86 lakhs in compare to Rs 4,663.87 lakhs for the previous financial year. Profit before tax has been increased by 11.29% i.e. from Rs 973.82 lakhs to Rs 1,083.76 lakhs during the financial year under report.

IV. Outlook

As Indias economic growth continues, the influence of the Digital India Mission is set to rise, with digital platforms revolutionising the delivery and accessibility of banking and financial services. 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.

NBFCs also play a crucial role in accelerating financial inclusion across India. 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. The growing importance of NBFCs is reflected in the consistent increase of their credit as a proportion to Indias GDP as well as in relation to credit extended by SCBs to the NBFC sector.

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

The company has a proper 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, 2025 is simplified in tabular form as under:

Sr Particulars	March 31, 2025 (Rs in lakhs)	March 31, 2024 (Rs in lakhs)
1 Revenue from operations	2,911.86	4,663.87
2 Profit before interest, depreciation and tax	3,252.51	4,543.12
3 Depreciation	46.55	50.88
4 Finance cost	2,122.20	3,518.43
5 Tax	277.24	262.21
6 Profit after tax	806.52	711.62
7 Net profit margin (%)	27.70	15.26
8 EPS (basic and diluted) (amount in Rs)	7.46	6.58

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. 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 5 employees employed by the company on payroll as on March 31, 2025. Industrial relations throughout the year continued to remain very cordial and satisfactory.

IX. Key financial ratios

Key indicators	2024-25	2023-24	Change (%)	Reason for change
PBT / total income (%)	32.68	20.87	56.51	Reduction in finance cost resulting into higher PBT
PBT / total assets (%)	2.75	3.23	(14.86)	Increased cash and cash equivalent resulting into higher total asset
Interest coverage ratio (x) (EBIDTA / Interest)	1.53	1.29	18.60	Reduction in finance cost
Debt / equity (x)	5.82	4.85	20.00	Increased borrowings by the company
Net profit margin (%)	27.70	15.26	81.52	Due to increase in finance cost and overall expense
Return on net worth (%)	14.15	14.10	0.35	Reduction in finance cost resulting into higher PAT at lower revenue from operations

Profit before tax (%) in the proportion of total income has shown upward trend of 56.51% as compared to that of last year. Total expenses including finance cost have also been decreased by 39.53% as the financial cost has also been reduced by 39.68% and thus profit before tax stands at Rs 1,083.76 lakhs compared to Rs 973.82 lakhs for previous financial year which shows rise of 11.29%. Net profit margin stands at 27.32% as compared to 15.26% for the previous financial year ended on March 31, 2024.

Cautionary statement

Certain statements in this annual report including the 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, 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.

Corporate governance report

I. Companys philosophy on code of corporate governance

The companys philosophy on corporate governance is founded on the fundamental ideologies of the group viz., trust, value and service. It has been a constant endeavor on the part of the company to achieve excellence in corporate governance by following the principles of transparency, accountability and integrity in functioning, so as to constantly striving to enhance value for all the stakeholders and society in general. The c ompanys governance framework is based on the principles of appropriate composition and size of the board with each member bringing in expertise in their respective domains; timely disclosure of material operational and financial information to the stakeholders; proper systems and processes of internal control as well as proper business conduct by the board, senior management and employees.

II. Board of directors

a. Composition of the board

The board is mainly headed by Mr. Rajesh Parmanand Khandwala who is chairman & managing director of the company. The independent directors on the board are experienced, competent and reputed persons from their respective fields. The independent directors take active part at the board and committee meetings, which adds vision, strategic direction and value in the decision making process of the board of directors. As at March 31, 2025, the composition of board is given herein below:

• Mr. Rajesh P. Khandwala (Executive chairman, managing, non independent director)

• Mr. Vimal P. Khandwala (Executive, non independent director)

• Mrs. Sonal R. Khandwala (Non executive, non independent, woman director)

• Mr. Sharvil Suthar (Non executive, independent director)

• Mr. Rajesh G. Parekh (Non executive, independent director)

• Mr. Dixit D. Shah (Non executive, independent director)

During the financial year ended on March 31, 2025, the second consecutive terms as independent directors of the company of Mr. Devang M. Shah and Mr. Dharmendra N. Soni expired on May 26, 2024 and thus they ceased to be directors of the company effective from closure of business hours on May 26, 2024. The company admires their invaluable contribution made towards growth of the company during their tenure.

b. Attendance of each director at the board meetings and at the last annual general meeting

The board meets at least once a quarter to review the quarterly financial results and operations of your company. In addition, the board has also constituted a managing committee to look after other managerial affairs of the company when it is not feasible to the board to convene a meeting.

Attendance of each director at the board meetings and at the last 29^th annual general meeting (AGM) (held on September 27, 2024) is as under:

Sr. no.			Dates of board meetings and attendance
	Name of director	May 25, 2024	August 10, 2024	October 8, 2024	November 14, 2024	February 13, 2025	29 AGM
1 Mr. Rajesh P. Khandwala		S	S	S	S	S	S
2 Mrs. Sonal R. Khandwala		S	S	S	S	S	S
3 Mr. Devang M. Shah*		S	NA	NA	NA	NA	NA
4 Mr. Dharmendra N. Soni*		S	NA	NA	NA	NA	NA
5 Mr. Vimal P. Khandwala		S	S	S	S	S	S
6 Mr. Sharvil B. Suthar		S	S	S	S	S	S
7 Mr. Rajesh G. Parekh		S	S	S	S	S	S
8 Mr. Dixit D. Shah		S	S	S	S	S	S

S denotes presence

* Second consecutive terms as independent directors of the company of Mr. Devang M. Shah and Mr. Dharmendra N. Soni expired on May 26, 2024 and thus they ceased to be directors of the company effective from closure of business hours on May 26, 2024.

c. Number of other board of directors or committees in which a director is a member or chairperson (as on March 31, 2025)

Sr. no. Name of director	Relationship inter-se directors	No. of other directorships (other than KIFS Financial	No. of board committees (other than KIFS Financial Services Limited)
		Services Limited)	Chairman	Member
1 Mr. Rajesh P. Khandwala	Spouse of Mrs. Sonal R. Khandwala and brother of Mr. Vimal P. Khandwala	6	2	3
2 Mr. Vimal P. Khandwala	Brother of Mr. Rajesh P. Khandwala	12	6	2
3 Mrs. Sonal R. Khandwala	Spouse of Mr. Rajesh P. Khandwala	-	-	-
4 Mr. Sharvil B. Suthar	-	-	-	-
5 Mr. Rajesh G. Parekh	-	2	-	-
6 Mr. Dixit D. Shah	-	-	-	-

d. Number and dates of board meetings held

Please refer point b. above

e. Disclosure of relationships between directors inter-se

Please refer point c. above

f. Number of equity shares and convertible instruments held by the non executive directors

Sr. no. Name of the non executive director	No. of equity shares held as on March 31, 2025	No. of convertible instruments held as on March 31, 2025
1 Mrs. Sonal R. Khandwala	-	Not issued by the company
2 Mr. Sharvil B. Suthar	-
3 Mr. Rajesh G. Parekh	-
4 Mr. Dixit D. Shah	-

g. Web link of details of familiarization programmes imparted to the independent directors

Following is the web link of familiarization programmes imparted to the independent directors of the company:

http://www.kifsfinance.com/category/independent-directors-familiarization-program.php

h. Matrix / table containing skills / expertise / competence of the board of directors

The board members are from diversified areas having the required knowledge, competency, skills and experience to effectively discharge their responsibilities. The range of experience of the board members includes in the areas of primary market, secondary market, mutual funds, arbitrage operations, banking & finance, taxation and legal.

The company has identified and broadly categorized its core skills, expertise and competencies as mentioned hereunder:

Matrix / table of core skills, expertise and competencies of board of directors as whole:

Particulars	Detailed list of core skills, expertise and competencies
Core Skills	Strategic policy formulation and advising, regulatory framework knowledge, financial performance, advising on Risk mitigation and compliance requirements
Expertise	Knowledge of stock market, commercial acumen and able to guide in building the right environment for human assets development
Competencies	Strategic leadership, execution of policies framed by the board, identifying the growth areas for expanding the business in India and outside India and advising on business risks & environment

All the board members i.e. Mr. Rajesh P. Khandwala, Mr. Vimal P. Khandwala, Mrs. Sonal R. Khandwala, possess the requisite skills, expertise and competencies as mentioned above in the table. Also Mr. Sharvil B. Suthar, Mr. Rajesh G. Parekh and Mr. Dixit D. Shah, independent directors of the company are company secretaries by profession and possesses the requisite knowledge of corporate governance, knowledge of NBFC, stock market and corporate advisory skills.