Lead Financial Services Ltd Management Discussions

ANNEXURE- A

Dear Shareholders,

We present the Management Discussion and Analysis Report (MDA), an integral part of the Companys Annual Report, providing a comprehensive understanding of our performance, future prospects, and industry landscape. This report offers a narrative from management on past performance and future outlook. We note that forward-looking statements involve risks and uncertainties, such as regulatory changes and economic conditions and actual results may vary.

ECONOMIC OVERVIEW

Global Economic Scenario

Financial year 2024-25 witnessed continued geopolitical and macroeconomic uncertainties across major economies, driven by changing policy directions, international trade tensions, and evolving monetary policies. A notable development was the return of President Trump in the United States, resulting in renewed protectionist policies and the introduction of tariffs on various countries. These actions led to retaliatory measures, increasing concerns about the possibility of a widespread global trade war.

Indian Economy

India entered FY 2024-25 with a cautiously optimistic outlook. Key macroeconomic indicators such as GDP growth, inflation, and external balances ? remained broadly stable. However, the sustainability of economic recovery is closely linked to trends in consumption and private investment. While reforms and targeted budgetary support from the government offer a potential boost to demand, the ultimate impact depends on effective execution. Ongoing global uncertainties, like trade disruptions and geopolitical tensions, continue to pose intermittent challenges, particularly for export-oriented sectors. Nevertheless, Indias strong structural fundamentals, robust foreign exchange reserves, and moderating inflation provide a positive backdrop for future growth.

INDUSTRY OVERVIEW

Non-Banking Financial Companies (NBFCs) continue to be essential pillars of the Indian financial ecosystem, serving micro, small and medium enterprises (MSMEs) as well as under banked and underserved segments of the population. NBFCs have demonstrated agility and efficiency in addressing a variety of credit needs, thus promoting financial inclusion and supporting MSME development. The sector is experiencing steady expansion, bolstered by growth in neo-banking and digital financial services.

COMPANY OVERVIEW

Lead Financial Services Limited (“the Company”) is registered as a Non-Deposit Taking, Non- Systemically Important Non-Banking Financial Company (NBFC-ND-NSI) with the Reserve

Bank of India (RBI). The Company is classified as an NBFC-Investment and Credit Company (NBFC-ICC) and, under the Reserve Banks Scale-Based Regulatory Framework (effective October 19, 2023), has been categorized in the Base Layer (NBFC-BL).

Key Regulatory Developments:

The regulatory landscape has become more stringent over time, leading to a robust and relevant business model. Notable regulations guiding the sector include:

• Mater Direction- Reserve Bank of India (Non-Banking Financial Company-Scale Based Regulation) Directions, 2023 for NBFCs:

The RBI has updated the Mater Direction- Reserve Bank of India (Non-Banking Financial Company-Scale Based Regulation) Directions, 2023 dated 19th October, 2023 for NBFCs. Under this framework NBFCs based on their size, activity, and perceived risks were classified under four layers: Base Layer (BL), Middle Layer (ML), Upper Layer (UL), and a possible Top Layer (TL).Each layer is subjected to specific regulatory requirements, with progressively tighter norms for the higher layers also include the following:

Net Owned Fund (NOF):

NBFC-ICC, NBFC-MFI, and NBFC-Factors must increase NOF to ?10 crore.

Glide path: NBFC-ICC from ?2 crore to ?5 crore by March 31, 2025, then ?10 crore by March 31, 2027. NBFC-MFI (?5 cr, ?2 cr in NE region) to ?7 cr (?5 cr NE) by March 2025; ?10 cr by March 2027. Similar for NBFC-Factors.

Board Governance:

Mandatory appointment of at least one director with prior banking or NBFC experience.

Risk Management Committee:

NBFC-BL must establish a board-level or executive-level Risk Management Committee (RMC) to oversee liquidity and other risks, and report to the Board.

Enhanced Disclosure:

Additional disclosures in annual financial statements?related-party transactions, sectoral exposures (e.g. real estate, capital markets), loans to directors or senior officers, customer complaints, etc

• Master Direction - Reserve Bank of India (Filing of Supervisory Returns) Directions - 2024

The RBI introduced Master Direction - Reserve Bank of India (Filing of Supervisory Returns) Directions - 2024 dated 27thFebruary, 2024 as a single reference for all Supervisory Returns and to harmonize the timelines for filing of returns by supervised Entities, all the relevant instructions have been rationalized and consolidated into a single Master Direction.

Opportunities, Challenges, and Threats:

For Base Layer NBFCs with smaller asset sizes, the current landscape presents a mix of opportunities, challenges, and threats.

On the opportunity side, they are well-positioned to benefit from Indias financial inclusion push, especially in underserved rural and semi-urban areas where demand for credit remains strong. Partnerships with fintechs, payment banks, and digital platforms can help expand reach and lower operational costs, while focusing on niche segments such as micro-loans, small business finance, gold loans, or vehicle finance can build strong local dominance. Access to government-backed refinance and guarantee schemes like CGTMSE and Mudra also offers scope to grow with reduced credit risk. Additionally, the clarity brought in by the Scale-Based Regulation (SBR) framework allows for better long-term planning, with lighter compliance compared to higher- layer NBFCs.

However, these opportunities are tempered by significant challenges. The phased increase in minimum Net Owned Fund to ?10 crore by March 2027 can be a hurdle for smaller promoters, and the shift to a 90-day overdue NPA recognition norm will likely push up reported NPAs and provisioning requirements. Funding costs remain higher compared to banks, with limited access to diverse capital sources. Smaller NBFCs also face rising technology and compliance expenses due to RBIs reporting and automation mandates, along with difficulties in attracting experienced directors and skilled compliance professionals in less urban markets.

Threats in the environment add another layer of caution. Regulatory tightening could extend more stringent capital and governance norms to base-layer entities if stress events occur in the sector. Competition from banks and larger NBFCs, especially in small-ticket lending, can erode margins. Credit risk remains high in borrower segments vulnerable to income shocks such as poor monsoons, inflation, or economic slowdowns. Furthermore, even isolated failures among small NBFCs can damage sector-wide trust, and the increased use of digital channels exposes them to greater fraud and cyber risk without strong internal controls.

Segment-Wise Performance:

The Company operates as a Non-Banking Finance Company (NBFC) in a single segment, the financial activity segment.

Outlook

The outlook for small NBFCs in India for current fiscal year looks positive with expected growth in assets under management and an increasing role in supporting the socioeconomic construct of Indian economy with a focus on financial inclusion.

Risk and Concern:

We are committed to identifying risks and maintaining robust risk management mechanisms to achieve our Companys mission and vision. Effective risk management is essential to balance risk and rewards in todays complex business environment. The Company recognizes potential risks, deploys appropriate systems and processes to measure and monitor them, and implements mitigation strategies within the appropriate framework.The Companys risk management framework strictly adheres to industry standards, with a robust control framework serving as its foundation.

Adequacy of Internal Control System:

The Company maintains a system of internal controls to ensure effectiveness and efficiency in operations, safeguard assets, ensure reliability in financial controls, and comply with applicable laws and regulations. The internal audit function continuously evaluates the adequacy of policies, regulatory compliance, and risk management. The Audit Committee oversees the internal audit function and periodically reviews the findings.

Performance Review:

During the financial year, the Company achieved a Total Income of ^63.20 Lakh compared to ^53.90 Lakh in the previous year. The Net Profit (after tax) for the year stood at ? 16.29 Lakh compared to ^24.70 Lakh in the previous year. The Board of Directorsof your Company is actively exploring new business avenues and strategic initiatives aimed at ensuring the long-term growth and sustainability of the Company.

Human Resources and Industrial Relations:

We consider our employees as our most valuable asset and foster an open, transparent, and meritocratic culture. The Company fosters employee development and well-being, ensuring equal opportunities and nurturing harmonious relationships. As of March 31, 2025, the Company has 3 permanent employees on its rolls.

Your Company continues to support all its employees in all possible ways and meansin these tough times. The employee relationship with the company remained harmonious throughout the year.

	For and on behalf of the Board
	For Lead Financial Services Limited
	Sd/-
	Padam Chandra Bindal
Place: New Delhi	Chairman
Date: 22/08/2025	DIN:00004769