Mangalam Industrial Finance Ltd Management Discussions

The Directors are pleased to present the Management Discussion and Analysis Report ("MDAR") for the financial year ended March 31, 2025. This Report provides an overview of the Companys operational and financial performance during the year, along with key achievements, business environment, opportunities, risks, challenges, and future outlook. The analysis is intended to offer stakeholders a comprehensive understanding of the Companys strategies, performance drivers, and prospects going forward.

GLOBAL ECONOMIC SCENARIO:

The global economy in 2024 demonstrated remarkable resilience amidst persistent headwinds, with growth stabilizing at 3.2%. Several large economies displayed strength despite challenges arising from geopolitical tensions, elevated interest rates, tightening financial conditions, and the increasing frequency of extreme weather events. However, these factors, alongside rising protectionism, have weighed on global trade and industrial output, creating a subdued outlook for the coming years.

The United States recorded a robust 2.8% growth, exceeding earlier estimates, supported by strong consumer spending and favorable financial conditions. India maintained its position as the worlds fastest-growing major economy, expanding by 6.5%, driven by sustained domestic demand, rising investments, and resilience across key sectors such as information technology, services, agriculture, and manufacturing. In contrast, the Euro Area struggled with weak momentum, largely due to Germanys slowdown amid subdued manufacturing output and lingering trade uncertainties. Chinas growth moderated to 4.8%, constrained by structural challenges in the property sector and weakening consumer confidence.

The trade landscape became increasingly uncertain with the announcement of new US tariffs and expected retaliatory measures from trading partners, pushing tariff levels to historic highs. These developments are anticipated to disrupt trade flows and dampen global growth projections. Central banks across advanced and emerging economies have therefore remained cautious, balancing the need to ease monetary policy with the imperative of addressing inflationary pressures and financial stability risks. The IMF noted that while global financial conditions remain broadly accommodative, differentiation persists: equities in advanced markets have rallied on expectations of more business- friendly policies in the US, whereas emerging markets have faced tighter conditions due to the strengthening of the US dollar.

Global inflationary pressures eased during 2024, with headline inflation falling from 6.8% to 5.9%. Advanced economies experienced faster disinflation owing to effective monetary tightening, while inflation in emerging markets moderated more gradually. Looking ahead, global headline inflation is projected to decline further, reaching 4.3% in 2025 and 3.6% in 2026. Meanwhile, heightened geopolitical instability and market volatility drove a sharp 25.5% increase in gold prices, reaffirming its role as a safe-haven asset and hedge against uncertainty.

Global growth is projected to moderate to 2.8% in 2025 and 3.0% in 2026, with emerging markets and developing economies expected to expand by 3.7% in 2025 and 3.9% in 2026. However, countries most affected by trade

disruptions, particularly China, are likely to face significant growth downgrades. Against this backdrop, the global economic landscape is set to undergo structural shifts as countries recalibrate priorities and policies to balance growth with fiscal prudence, debt sustainability, and reduction of inequalities.

Source: Economic Survey, Ministry of Finance, Jan 2025 and IMF, World Economic Outlook, April 2025 .

INDIAN ECONOMIC REVIEW AND OUTLOOK

Despite a backdrop of global stagnation, heightened geopolitical uncertainties, and the growing threat of tariff wars fuelled by protectionist trends, the Indian economy has continued to stand out as the worlds fastest-growing major economy. The countrys demographic dividend and the rising affluence of its middle class have underpinned resilience across key growth drivers, including private consumption, the services sector, and capital and forex markets. These structural strengths have enabled India to withstand global headwinds more effectively than many of its peers.

As per the first advance estimates released by the National Statistical Office (NSO), Ministry of Statistics & Programme Implementation (MoSPI), Indias real Gross Domestic Product (GDP) growth for FY25 is projected at 6.4%. On the demand side, Private Final Consumption Expenditure (PFCE) at constant prices is expected to expand by 7.3%, reflecting a broad-based recovery in domestic consumption and a notable revival in rural demand.

The International Monetary Fund (IMF), in its World Economic Outlook Update (January 2025), reaffirmed Indias position as the fastest-growing major economy, projecting GDP growth of 6.5% in both 2025 and 2026. This positive growth trajectory is supported by resilient domestic demand, a thriving services sector, and sustained investment momentum. The IMF has highlighted Indias favourable demographics, expanding middle-class income, and ongoing policy reforms as key enablers of its robust performance.

While global challenges persist in the form of trade disruptions, geopolitical risks, and tighter financial conditions, Indias stable macroeconomic fundamentals, deepening consumer base, and continued emphasis on infrastructure development have reinforced confidence in its growth outlook. Furthermore, the external sector remains a critical source of resilience, with substantial foreign exchange reserves and steady capital inflows strengthening Indias ability to navigate global economic uncertainties and maintain stability.

Sources: National Statistical Office (NSO), Ministry of Statistics & Programme Implementation (MoSPI); International Monetary Fund (IMF), World Economic Outlook Update, January 2025.

FORWARD LOOKING STATEMENTS

The statements made in the Management Discussion and Analysis regarding the Companys financial condition and operational performance may include forward-looking information relating to its objectives, expectations, projections, market and industry trends, strategic initiatives, and technological developments, as defined under applicable securities laws and regulations. These forward-looking statements are inherently subject to risks, uncertainties, and assumptions about future events. They are based on current forecasts and expectations concerning future performance, which may not necessarily materialize as anticipated.

The Company makes no assurance that these assumptions or expectations will prove to be accurate, and actual results may vary significantly from those expressed or implied in such statements.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The NBFC sector plays a vital role in Indias financial ecosystem by extending credit to a broad range of economic segments, including those that may be underserved by traditional banks. In parallel, NBFCs maintain strong linkages with commercial banks, mutual funds, and insurance companies, supporting financial stability and ensuring a well- diversified funding base. Assets under management (AUM) for NBFCs are projected to grow at a healthy pace of 1517% over FY2025 and FY2026. Although this marks a slight deceleration from the impressive 23% growth seen in FY2024, it remains above the long-term average annual growth rate of 14% recorded during FY2014-2024.

Since FY2019, the NBFC sector has navigated a series of challenges, beginning with the collapse of a major NBFC and the resulting liquidity strain, followed by the impact of the COVID-19 pandemic and, more recently, the tightening of monetary policy in response to elevated inflation. However, these pressures have gradually subsided over the past two years. As per the RBIs Financial Stability Report (December 2024), the sector remains resilient, backed by strong capital adequacy (Capital to Risk Weighted Assets Ratio at 26.1% as of September 2024), healthy profitability indicators (Net Interest Margin at 5.1% and Return on Assets at 2.9%), and improving asset quality (Gross Non-Performing Assets at 3.4% of gross advances).

NBFCs are currently adapting to an evolving regulatory environment and increased oversight by the central bank. Since November 2023, the rise in risk weights on bank lending to NBFCs has led to a moderation in their Assets Under Management growth. However, with this regulatory measure set to be rolled back at the start of FY2026, access to bank funding is expected to improve. In response to reduced bank credit availability, NBFCs have turned to alternative funding avenues such as capital market instruments, foreign currency borrowings, and securitization. While these sources have helped diversify funding, the greater dependence on non-bank channels has raised the cost of capital, thereby putting pressure on profitability.

Despite facing various challenges, NBFCs have continued to maintain sufficient provisions for non-performing assets, reflecting effective loan resolution strategies and improvements in asset quality. Furthermore, the ongoing regulatory adjustments—driven by the RBIs increased emphasis on customer protection, operational compliance, and transparent pricing disclosures—are expected to influence and refine the sectors lending practices going forward.

BUSINESS PERFORMANCE AND SEGMENT REPORTING

The analysis presented herein relates to the financial performance of the Company for the year ended March 31, 2025. The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013, read with the relevant rules issued thereunder, as amended from time to time. The significant accounting policies adopted in the preparation of the financial statements are provided in the notes to the standalone financial statements.

SUMMARY OF FINANCIAL PERFORMANCE

During the financial year 2024-25; the company achieved operating revenue amounting to ^ 355.96 lakhs, which is higher than the financial year 2023-24; operating revenue amounting to ^ 261.30 lakhs.

Net profit for the financial year 2024-25; is ^ 123.19 lakhs which is 556.31% higher than the financial year 2023-24 i.e. ^ 18.77 lakhs.

• Revenue

(INR in lakhs)	FY 2024-25	FY 2023-24	Change
Operating Revenue	355.96	261.30	36.23%
Other Income	0.00	0.16	(100.00%)

• Impairment Provisions (Loans)

(INR in lakhs)	FY 2024-25	FY 2023-24	Change
Impairment Provisions (Loans)	4.97	30.30	(83.60%)
% of Revenue	1.40%	11.60%	NA

• Employee benefit expenses

(INR in lakhs)	FY 2024-25	FY 2023-24	Change
Employee Benefits Expense	36.96	60.56	(38.97%)
% of Revenue	10.38%	23.17%	NA

• Depreciation & Amortization expenses

(INR in lakhs)	FY 2024-25	FY 2023-24	Change
Depreciation & Amortization Expense	4.54	3.40	33.53%
% of Revenue	1.28%	1.30%	NA

• Other expense

(INR in lakhs)	FY 2024-25	FY 2023-24	Change
Other Expense	107.94	141.56	(23.75%)
% of Revenue	30.32%	54.17%	NA

VISION

In the year ahead, our vision is to strengthen our position as a leading Non-Banking Financial Company (NBFC) by harnessing advanced technologies and offering innovative financial solutions tailored to our clients diverse needs. Through ongoing digital transformation, we have enhanced operational efficiency, elevated the customer experience, and accelerated loan disbursement processes—enabling our clients to achieve their financial objectives more seamlessly and effectively.

We are also dedicated to driving sustainable growth by upholding responsible lending practices and strengthening our risk management frameworks. Our vision encompasses broadening our product offerings to include a more diverse

range of financial services—such as personal loans, vehicle loans, business loans, and housing loans—designed to meet the evolving needs of our customers. By fostering strong relationships with stakeholders and investing in the continuous development of our team, we aspire to build a resilient, customer-focused NBFC that makes a meaningful contribution to the economic advancement of the communities we serve.

SEGMENT WISE PERFORMANCE

The Company is into single segment reporting. ROAD AHEAD & FUTURE OUTLOOK

Looking ahead, the Company remains optimistic about its prospects. We will be exploring newer growth avenues like:

> Vehicles finance, particularly financing of two-wheeler and three-wheeler electric vehicles manufactured by the group Company;

> Working Capital requirements;

> General Corporate purpose;

> Investment in its group Company specifically in the hospitality sector; herbal & ayurvedic products, financial products, frozen foods & aviation sector;

> Temporary lending of loans & advances;

> Investment in marketable securities/mutual funds, etc.

> Investment in real estate sector

INTERNAL CONTROL AND ADEQUACY OF INTERNAL CONTROL

The Company firmly believes that robust internal control is essential for sound corporate governance and that autonomy must operate within a system of checks and balances. Accordingly, the Company has implemented a comprehensive internal control framework aimed at continually evaluating the adequacy, effectiveness, and efficiency of its financial and operational controls. Regular audits of all functions are conducted by the internal auditors to ensure compliance with applicable laws, regulations, and internal policies and procedures.

The management remains committed to maintaining a robust internal control environment that is aligned with the size and complexity of the business. This framework provides assurance regarding compliance with internal policies, applicable laws and regulations, and safeguards the Companys assets and resources. Company policies are regularly reviewed and updated to reflect changes in the business environment and evolving regulatory requirements. The Board periodically reviews compliance with internal control systems as well as findings from internal audit reports.

Based on the internal financial control framework and compliance systems established and maintained by the Company, along with the work carried out by the Internal, Statutory, Secretarial, and Information Systems Auditors, external consultants, and the reviews conducted by the management and the Audit Committee, it is affirmed that the Company has robust internal financial controls. These controls are adequate, effective, and appropriate for the nature and scale of its operations, with no material weaknesses identified.

OPPORTUNITY

Non-Banking Financial Companies (NBFCs) hold significant growth potential within the financial sector. One of their key strengths lies in the flexibility to serve targeted market segments and provide a diverse range of financial services with fewer regulatory limitations compared to traditional banks. Notable opportunities include venturing into niche areas such as microfinance for underserved populations and offering specialized lending solutions tailored to the unique needs of specific industries.

Consumer finance presents a major growth opportunity, fueled by the expanding middle class and rising demand for personal loans, credit cards, and other consumer credit offerings. Furthermore, rural and agricultural finance holds considerable promise, as it plays a vital role in promoting rural development and extending financial access to previously underserved communities.

NBFCs are well-positioned to seize opportunities across various segments, including niche financial services, consumer lending, rural and agricultural finance, digital transformation, and collaborations with fintechs. Growing demand for housing finance and MSME lending offers significant potential, while areas like trade finance and infrastructure funding present avenues for further expansion. Diversifying into green finance and offering services such as credit rating and analytics can also enhance their value proposition. Leveraging digital technologies to improve customer experience will be key to gaining a competitive advantage. By staying innovative and adaptive, NBFCs can effectively serve underserved markets and meet the evolving financial needs of both individuals and businesses.

THREATS

In terms of threats, we believe that elevated interest rates could impact funding costs, potentially slowing down credit uptake and increasing credit costs. Additionally, heightened competition from the banking sector may affect the growth of NBFCs like ours.

As an NBFC, the Company faces several specific threats, including:

1. Funding Constraints and Cost of Capital:

Access to debt capital markets and borrowing costs are closely linked to the credit ratings of both the Company and the sovereign. Any adverse revision in these ratings could limit financing options and increase the cost of funds.

2. Rising Competition:

The MSME lending segment is witnessing intensified competition from banks, fintech players, and emerging NBFCs. While the sector remains significantly underpenetrated, sustaining a competitive advantage will require continuous investments in technology, faster disbursal capabilities, and superior customer service.

3. Macroeconomic and Market Volatility

Global uncertainties, interest rate fluctuations, or an economic slowdown could weaken customer repayment capacity, dampen investor sentiment, and adversely affect loan performance. Such conditions may lead to higher delinquency levels, impacting both profitability and asset quality.

4. Regulatory and Policy Risks

NBFCs operate in a dynamic regulatory environment. Recent changes, including higher risk weights on bank exposures to NBFCs, have added to borrowing costs. Further regulatory interventions or compliance requirements may constrain growth opportunities or increase operational expenses.

5. Credit Rating Dependence

Capital-raising ability is directly influenced by the credit ratings of the Company and Indias sovereign rating. Any downgrade could adversely affect market access, increase borrowing costs, and put pressure on liquidity and expansion plans.

RISKS AND CONCERNS

The Company remains committed to a strong risk management framework aimed at proactively identifying and addressing material risks while strengthening resilience in a dynamic business environment. Our objective is to maintain a consistent approach to risk management that ensures an optimal balance between risk and return, thereby safeguarding the interests of the organization and its shareholders.

The Company is exposed to a broad spectrum of risks, including credit, market, operational, and reputational risks. Each category is managed through well-defined risk management policies, with oversight ensured through periodic monitoring by the Boards subcommittees.

1. Credit risk:

The Companys credit management framework is governed by well-defined Credit Policies and a Board-approved Delegation of Authority Matrix. Credit risk is assessed, monitored, and managed both at the individual borrower level and across the overall loan portfolio. This structured approach strengthens the credit decision-making process and ensures comprehensive oversight of the portfolio.

2. Market Risk:

Market risk refers to the possibility of changes in the fair value or future cash flows of financial instruments due to variations in market variables such as interest rates, credit conditions, and other external factors. The Company is mainly exposed to interest rate risk and liquidity risk. To effectively manage these exposures, the Company conducts regular reviews and makes necessary adjustments to its business model.

3. Liquidity Risk:

Liquidity risk refers to the potential inability of the Company to meet its financial obligations to banks or financial institutions, regardless of location, currency, or timing. This risk can arise in three specific forms for the Company.

To mitigate liquidity risk, the Company has diversified its funding sources and adopts a strategy of matching its funding profile with the tenor and repayment schedules of its receivables. It also maintains close oversight of projected cash flows and overall liquidity. Robust internal control mechanisms and contingency plans are in place to ensure effective management of liquidity-related challenges.

4. Interest Rate Risk:

Interest rate risk arises from the possibility that changes in market interest rates could adversely affect the Companys financial position. In the short term, such fluctuations influence the Companys Net Interest Income, while over the long term, they can impact cash flows related to assets, liabilities, and off-balance sheet exposures. These changes may lead to repricing mismatches, potentially affecting the Companys net worth.

To manage this risk, the Company maintains a well-balanced portfolio of borrowings with varied tenors and interest rate structures.

5. Strategic Risk:

Strategic or business risk pertains to the potential challenges arising from the formulation and execution of the organizations strategic plans.

6. Information Technology risk :

The Company is actively progressing in its digitalization journey, aiming to leverage digital technologies to enhance customer experience, boost operational efficiency, and strengthen IT risk management. However, increased digital reliance brings exposure to cyber threats, including computer viruses, malicious software, phishing attacks, denial-of- service incidents, application vulnerabilities, and other security breaches that could disrupt operations or compromise sensitive internal and customer data.

To safeguard against these risks, the Company has established a comprehensive information and cyber security framework designed to protect its IT systems and infrastructure. Dedicated committees are responsible for regularly reviewing and monitoring the Companys IT security measures and ensuring preparedness against emerging cyber threats.

Additionally, the Company has implemented a structured risk management policy and review framework, providing oversight of various risk mitigation practices and ensuring a proactive approach to managing cyber and IT-related risks.

REVIEW OF OPERATIONS OF THE COMPANY

The financial operations of the company for the financial year ended on 31^st March, 2025 are as under:

(^ in lakhs)

Particulars	Standalone
	FY 2024-25	FY 2023-24
Net Sales/ Income from Operations	355.96	261.30
Other Income	0.00	0.16
Total Income	355.96	261.45
Total Expenses	154.42	235.82
Profit/(Loss) from operations before exceptional items and Tax	201.54	25.64
Profit/(Loss) from operations after exceptional items and before Tax	201.54	25.64
Profit/(Loss) before Tax	201.54	25.64
Tax Expense	78.36	6.87
Net profit after Tax	123.19	18.77

HUMAN RESOURCES

Human resource management plays a critical role in fostering a productive and cohesive work environment. With such a small team, each members contribution is vital, making it essential to focus on attracting and retaining top talent. Our recruitment strategy emphasizes finding individuals who not only possess the required skills and experience but also align well with our company culture. By offering competitive compensation and clear pathways for career advancement, we aim to ensure high levels of job satisfaction and long-term commitment from our team members.

Employee development and engagement are also central to our HR approach. We prioritize regular feedback and performance evaluations to align individual goals with our companys objectives and to identify opportunities for professional growth. Providing access to relevant training and encouraging a collaborative atmosphere helps enhance both skills and morale. Additionally, managing compliance with employment laws and handling administrative tasks such as payroll and benefits efficiently ensures smooth operations and supports a positive work environment. By focusing on these key areas, we aim to build a strong, motivated team that drives the success of our NBFC.

The Companys employee count (on roll) stood at 6 (Six) as on March 31, 2025.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

The details of significant changes in key financial ratios are as under:

Particulars	FY 2024-25	FY 2023-24
Current Ratio	0.75:1	4.22:1
Debt Equity Ratio	0.00:1	0.00:1
Operating Profit/(Loss) Margin*	56.62%	9.81%
Net Profit Margin*	34.61%	7.18%
Return on Net worth*	0.04	0.01

impairment Allowance on outstanding amount of loans and advances at the rate of 10% on Loan amount of Rs. 7,93,44,844.21/-, 30% on Loan amount of Rs 62,07,023.02/-, 100% on Loan amount of Rs. 7,17,57,874.14 /- (Since there is no recovery during the period) and 0.25% on Loan amount of Rs 20,75,89,994.57 /-. So during the year additional provision has been made of Rs. 4.97 Lakhs.

COMPLIANCE

The Compliance Department of the Company serves as the cornerstone of the organizations regulatory and governance framework, ensuring that all operations are conducted in strict accordance with the legal and regulatory standards established by financial authorities, including the Reserve Bank of India (RBI) and other relevant regulatory bodies. Its mandate goes beyond mere adherence to existing regulations; the department also anticipates, interprets, and prepares for new regulatory developments that may impact the Companys operations and strategic initiatives.

Working in close collaboration with all business units, the Compliance Department ensures that operational activities are fully compliant, thereby minimizing legal and regulatory risks while strengthening the Companys overall governance architecture. The department proactively educates and trains employees across the organization on

regulatory requirements, compliance best practices, and emerging risks, fostering a culture of integrity and accountability.

Key responsibilities of the department include conducting internal audits, preparing comprehensive compliance reports, and recommending timely corrective actions wherever necessary. Acting as a bridge between the Company and regulatory authorities, the Compliance Department ensures that all communications are accurate, timely, and transparent, thereby maintaining trust and credibility with regulators, investors, and customers.

By embedding compliance into the organizational culture, the department not only safeguards the Company against potential violations but also supports its long-term stability, sustainable growth, and reputation in the financial sector. Its proactive and preventive approach ensures that the Company remains agile, resilient, and well-prepared to meet evolving regulatory expectations.

CAUTIONARY STATEMENT

This Management Discussion and Analysis (MD&A) contains forward-looking statements that reflect our current views with respect to future events and financial performance. These statements are based on certain assumptions and expectations of future events that may or may not be accurate or realized. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Actual results, performance, or achievements could differ materially from those expressed or implied in these forwardlooking statements due to a variety of factors including, but not limited to, changes in the regulatory environment, economic conditions, market trends, and other risks associated with the Companys business operations. Readers are cautioned not to place undue reliance on these forward-looking statements and are advised to refer to the risk factors outlined in this report.

For Mangalam Industrial Finance Limited

SD/-	SD/-
Venkata Ramana Revuru	Yatin Sanjay Gupte
Managing Director	Non-Executive Non- Independent Director
DIN:02809108	DIN:07261150
Place: Vadodara
Date: 30th August, 2025