KJMC Financial Services Ltd Management Discussions

OVERVIEW

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013, guidelines issued by the Securities and Exchange Board of India (SEBI), prudential norms issued by Reserve Bank of India, Ind AS i.e. Indian Accounting Standards prescribed by the Institute of Chartered Accountants of India and the Generally Accepted Accounting Principles in India. Our Management accepts responsibility for the integrity and objectivity of these financial statements. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, so that the financial statements reflect in a true and fair manner and reasonably present our state of affairs, profit / loss and cash flows for the year.

Global Economic Performance

The global economy demonstrated resilience during 2025, expanding by an estimated 3.3%, supported by steady domestic demand, resilient labour markets and easing financial conditions across several economies. However, according to the International Monetary Fund (IMF) World Economic Outlook - April 2026, the global growth outlook has moderated, with world GDP projected to expand by 3.1% in 2026, before improving marginally to 3.2% in 2027. The moderation reflects the adverse impact of geopolitical conflicts, elevated trade uncertainty, tighter financial conditions and higher commodity prices, particularly following renewed tensions in the Middle East.

Inflation, while substantially lower than the peaks witnessed in recent years, is expected to experience a temporary increase during 2026 owing to higher energy and commodity prices before resuming its downward trajectory in 2027. Emerging market and developing economies are expected to continue outperforming advanced economies in terms of growth, although they remain more vulnerable to inflationary pressures, geopolitical risks and external financing conditions. The IMF highlights that prolonged geopolitical conflicts, increasing trade fragmentation, elevated public debt and financial market volatility continue to pose downside risks to the global economic outlook, while productivity gains from technological advancements and structural reforms could provide support to medium-term growth.

The Indian Economy

The Indian economy continued to demonstrate resilience amid a challenging global macroeconomic environment, supported by robust domestic demand, sustained public capital expenditure and improving private investment. According to the Economic Survey 2025-26, Indias real GDP is estimated to have grown by 7.4% in FY 2025-26, compared with 6.5% in FY 2024-25, making it one of the fastest-growing major economies globally. The Survey projects real GDP growth in the range of 6.8%-7.2% for FY 2026-27, underpinned by healthy household consumption, strengthening corporate and banking sector balance sheets, resilient investment activity and continued infrastructure development. Private Final Consumption Expenditure accounted for 61.5% of GDP, the highest level since 2011-12, reflecting the strength of domestic demand. The Survey also estimates Indias medium-term growth potential at around 7%, supported by structural reforms and sound macroeconomic fundamentals.

The International Monetary Fund (IMF) also continues to identify India as one of the worlds fastest-growing major economies, projecting real GDP growth of approximately 6.4% in 2026, significantly above the global average. Indias growth outlook continues to be supported by favourable

demographics, digital transformation, manufacturing initiatives, infrastructure investments and policy reforms. Nevertheless, external risks including geopolitical tensions, global trade fragmentation, volatility in crude oil prices and uncertain external demand remain key factors that could influence the economic outlook. Overall, Indias strong domestic demand, improving investment cycle and prudent macroeconomic management position the economy favourably for sustainable long-term growth

Over the past three fiscals (Fiscals 2022 to 2024), the Indian economy has outperformed its global counterparts by witnessing a faster growth. In the IMFs April 2025 update, it raised the GDP growth forecast for India highlighting Indias improved prospect for private consumption particularly in rural areas. Going forward as well, IMF projects that Indian economy will remain strong and would continue to be one of the fastest growing economies.

NBFC Sector

The RBI observed that NBFCs continue to maintain sound financial health with adequate capital buffers, healthy profitability and improving asset quality. While the Non-Banking Stability Indicator (NBSI) recorded a moderate increase due to some softening in profitability and liquidity indicators, the overall risk level remained below its long-term average, indicating that systemic risks remain contained. Stress tests conducted by the RBI also indicate that although asset quality could soften under adverse macroeconomic scenarios, the sector is expected to remain resilient, supported by strong capitalisation and prudent risk management practices.

Looking ahead, the long-term outlook for the NBFC sector remains favourable, driven by sustained domestic consumption, increasing credit penetration, digital financial infrastructure and rising financing requirements across retail, MSME and infrastructure segments. The RBIs Scale-Based Regulation (SBR) framework, strengthened governance standards and enhanced supervisory oversight are expected to further reinforce the resilience of the sector. Nevertheless, funding costs, evolving regulatory requirements, asset quality trends and global macroeconomic uncertainties remain key factors that warrant continued monitoring.

BUSINESS REVIEW

Your Company is a NBFC registered with the RBI to carry out NBFC activities under Section 45(IA) of the Reserve Bank of India Act, 1934 and it is engaged primarily in the business of investing/trading in securities and advancing need-based loans. The Company is also involved in providing fund based financial services and funding solutions to the Indian Corporate, institutions, MSMEs, Individuals, etc.

FINANCIAL REVIEW

On standalone basis, your Company earned the gross income of Rs. 632.93 lakhs as against Rs. 522.41 lakhs in the previous year. The total expenditure during the year under review was Rs398.41 lakhs as against Rs. 402.62 lakhs in the previous year. The Net Profit after tax before OCI was Rs. 162.96 lakhs as against Rs. 81.23 lakhs in the previous year.

On consolidated basis, your Company earned the gross income of Rs 688.19 lakhs as against Rs 536.78 lakhs in the previous year. The total expenditure during the year under review was Rs 438.10 lakhs as against Rs 405.47 lakhs in the previous year. The Net Profit after tax before OCI was Rs 170.85 lakhs as against Rs 84.85 lakhs in the previous year.

KEY FINANCIAL RATIOS

Risks and Challenges

Despite maintaining strong financial fundamentals, the Indian NBFC sector continues to face several structural and macroeconomic challenges. Elevated global uncertainty, geopolitical tensions, volatility in crude oil prices and fluctuations in global financial markets could impact funding conditions, investor sentiment and credit demand. Given the sectors reliance on market borrowings and bank funding, any tightening of domestic or global liquidity conditions may increase the cost of funds and exert pressure on net interest margins.

Asset quality remains an important area of focus as rapid growth in retail, MSME and unsecured lending may expose NBFCs to higher credit risk during periods of economic slowdown. The Reserve Bank of India (RBI), in its Financial Stability Report - June 2026, observed a moderate increase in the overall risk profile of the NBFC sector due to some softening in profitability and liquidity indicators, while noting that systemic risks remain below their long-term average. The RBIs stress tests also indicate that adverse macroeconomic scenarios could lead to higher stressed assets and lower capital buffers, highlighting the need for prudent underwriting standards, effective risk management and adequate capital planning.

The sector is also navigating an evolving regulatory landscape under the RBIs Scale-Based Regulation (SBR) framework, which places greater emphasis on governance, capital adequacy, risk management and compliance. At the same time, increasing digitalisation has heightened exposure to cybersecurity threats, data privacy concerns and technology- related operational risks. In addition, rising interconnectedness between banks and NBFCs, coupled with growing household leverage in certain retail lending segments, requires continued vigilance to preserve financial stability. Nevertheless, strong capitalisation, improving asset quality and enhanced regulatory oversight position the sector well to address these challenges over the medium term.

OPPORTUNITIES AND THREATS

Opportunities

Indias NBFC sector is well positioned to capitalise on the countrys strong macroeconomic fundamentals, favourable demographics and expanding credit ecosystem. With India projected to remain one of the fastest-growing major economies, rising disposable incomes, increasing urbanisation and growing consumer aspirations are expected to drive sustained demand for retail credit, vehicle finance, affordable housing finance and consumer lending. At the same time, the formalisation of the economy and the rapid expansion of the Micro, Small and Medium Enterprises (MSME) sector are creating significant opportunities for NBFCs to bridge the credit gap by serving customer segments that often have limited access to traditional banking channels.

The continued advancement of Indias digital public infrastructure- including Aadhaar, Unified Payments Interface (UPI), Account Aggregator framework, DigiLocker and e-KYC-has transformed the lending landscape by enabling faster customer onboarding, efficient credit appraisal and seamless loan disbursement. The increasing adoption of data analytics, artificial intelligence and digital lending platforms is enhancing operational efficiency, improving customer experience and supporting better credit risk assessment. In addition, government initiatives aimed at promoting financial inclusion, infrastructure development, affordable housing and MSME growth are expected to generate longterm demand for credit, providing NBFCs with opportunities to diversify their lending portfolios and strengthen their market presence.

Furthermore, the Reserve Bank of Indias Scale-Based Regulation (SBR) framework is fostering a stronger and more resilient NBFC ecosystem through enhanced governance, improved risk management practices and higher prudential standards. As the sector continues to mature, well-capitalised and professionally managed NBFCs are expected to benefit from increased investor confidence, improved access to funding and greater opportunities for strategic partnerships with banks, fintech companies and digital ecosystem participants.

5) Infrastructure and Green Finance

Infrastructure and green finance are emerging as key focus areas in Indias financial sector. With the governments push for large-scale infrastructure development and a transition to clean energy, there is growing demand for long-term, sustainable financing. Financial institutions are increasingly supporting projects in renewable energy, transportation, and urban development through green bonds and ESG-linked investments. This shift not only supports economic growth but also aligns Indias financial system with global sustainability goal.

Threats

Despite the favourable long-term outlook, the NBFC sector continues to face a number of macroeconomic, regulatory and operational challenges. Global geopolitical tensions, trade disruptions, inflationary pressures and volatility in commodity prices may adversely affect economic activity, borrower repayment capacity and overall credit demand. Changes in domestic and global interest rate cycles could increase borrowing costs for NBFCs, leading to pressure on net interest margins and profitability. Given the sectors dependence on diversified funding sources, including bank borrowings and capital markets, any tightening in liquidity conditions may also impact funding availability and refinancing costs.

Asset quality remains a key area of focus, particularly in unsecured retail lending, MSME financing and other higher-risk borrower segments. While the overall financial health of the sector remains strong, any slowdown in economic growth or weakening in household income could result in higher delinquencies and credit losses. In its Financial Stability Report - June 2026, the Reserve Bank of India observed a moderate increase in the overall risk profile of the NBFC sector due to some softening in profitability and liquidity indicators, while noting that systemic risks continue to remain below their long-term average.

The sector is also operating in an increasingly dynamic regulatory environment. The implementation of the RBIs Scale-Based Regulation framework, strengthened governance norms, enhanced disclosure requirements and risk-based supervisory practices, while contributing to long-term financial stability, are expected to increase compliance obligations and operational costs. Moreover, the rapid digitalisation of financial services has heightened exposure to cybersecurity threats, digital fraud, data privacy concerns and technology-related operational risks. Intensifying competition from banks, fintech companies and digital- first lending platforms may further exert pressure on pricing, customer acquisition and product innovation. Accordingly, maintaining prudent underwriting standards, robust liquidity management, strong governance practices and continuous investment in technology and cybersecurity will remain critical for ensuring sustainable growth and long-term resilience.

ADEQUACY OF INTERNAL CONTROLS

Your Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition and that transaction are authorised, recorded and reported correctly. The Company has an extensive system of internal control which ensures optimal utilisation and protection of resources, its security, accurate reporting of financial transactions and compliances of applicable laws and regulations as also internal policies and procedures. Your Company has in place, an adequate internal control and internal audit system managed by qualified and experienced people. Main objective of the system is to safeguard the Companys assets against loss through unauthorised use and pilferage, to ensure that all transactions are authorised, recorded and reported correctly and timely, to ensure various compliances under statutory regulations and corporate policies are made on time and to figure out the weaknesses persisting in the system and suggest remedial measure for the same. The Company has continued its efforts to align all its processes and controls with best practices in these areas. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors including audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management and the relevant board committees, including the audit committee, the board is of the opinion that the Companys internal financial controls were adequate and effective during FY 2025-26.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

Your Company continues to lay great stress on its most valuable resource - people. Continuous training, both on the job and in an academic setting, is a critical input to ensure that employees at all levels are fully equipped to deliver a wide variety of products and services to the rapidly growing customer base of your Company. It is our endeavour to create

an environment where people can use all of their capabilities in support of the business. Therefore, your Company encourages its employees to balance their work and personal responsibilities. The Company is actively working on developing a culture driven by the collective spirit of experience and companywide ownership. Assignment, empowerment and accountability will be the cornerstone of the people-led processes.

BUSINESS OUTLOOK

INVESTMENTS AND TRADING

KJMC Financial Services Limited is expanding its investment activities in listed and unlisted equity, bonds, REITs, etc., both directly and through Portfolio Management Services (PMS) and Alternative Investment Fund (AIF) schemes, in addition to trading in indices.

Apart from investment and trading activities, KJMC Financial Services Limited has also other business opportunities like:

1. KJMC Financial Services Limited can enter into loan transaction through which the transferor transfers all or part of its economic interest in loan exposure to the Company (transferee) without the actual transfer of loan or contract wherein the Company (transferee) provides the fund to the transferor to the extent of economic interest.

2. Loan against Shares/ Mutual Fund Units: The Company can give loans against pledge of shares, mutual fund units, etc.

3. MSME Loans: KJMC Financial Services Limited can offer Loans against Property to SMEs, MSMEs against mortgage of their residential and commercial properties. This product will help clients address funding requirements for both personal and business needs. Clients leverage the economic worth of their property without giving away ownership.

4. Need-based Working Capital Loans: The company is offering need-based working capital loans to the MSMEs / Proprietorships / Individuals for meeting short-term bridge finance, either unsecured / secured by shares, personal guarantees etc.

TALENT MANAGEMENT:

We believe that investing in our employees is critical to our long-term success and we will continue to prioritize talent management in years to come focusing on creating a highly engaged and motivated employee base.

We aim at improving the recruitment process, enhancing the boarding experience, investing in training and development as well as creating career development plans or succession plan higher growth.

At KJMC, we promote an atmosphere of inclusion, by encouraging the next level of employees to take higher responsibilities. Managers along with Human Resources formulate a customized grooming and orientation of high potentials, by carefully planning their work experiences. Their skills and capabilities are developed through further training and mentoring.

CLIENT ASSET SAFEGUARDING:

Transparency: Maintaining transparency with clients about potential risks and the steps being taken to mitigate risk factors which enhances trust and confidence.

CAUTIONARY STATEMENT

Management discussion and analysis report contains statements which are forward looking based on assumptions. Actual results may differ from those expressed or implied due to risk and uncertainties which have been detailed in this report. Several factors as listed in this report could make significant difference to the Companys operations. Investors, therefore,

are requested to make their own independent judgments and seek professional advice before taking any investment decisions.

Sources:

1. International Monetary Fund (IMF) (World Economic Outlook - April 2026)

2. RBI - Financial Stability Report June 2026

3. Public Sources