Mansi Finance (Chennai) Ltd Management Discussions

Mansi Finance (Chennai) Limited, a Company registered with the Reserve Bank of India as a Non-Banking Finance Company is providing finance and financial services to its clients and customers.

Economic & Industry Scenario and Outlook

Following a prolonged period of disruptions and uncertainties, the global economy is stabilizing, albeit with growth expectations remaining tempered. Escalating trade tensions, led by a slew of tariff impositions, imparted uncertainty to the growth outlook across regions, posing new headwinds for the global economy. Financial markets have responded through sharp fall in dollar index and equity sell-offs, significant volatility in bond yields and softening of crude oil prices. Gold prices continued to strengthen, reaching new heights across every month in 2025. Against the backdrop of frequent shocks, economic activity has remained fairly resilient through 2024, although below historical average.

India has demonstrated resilience and progress in the face of global economic uncertainties, with timely policy interventions aimed at ensuring macroeconomic stability and providing an impetus to both financial and non financial sectors. Substantial investments in robust physical and digital public infrastructure have allowed the country to navigate both domestic and international challenges, ensuring sustained economic progress.

The National Statistics Office (NSO) has estimated real Gross Domestic Product (GDP) growth at 6.5% for FY 2024-25 on the back of robust growth in private final consumption expenditure. On the supply side, real gross value added (GVA) expanded by 6.4% year-on-year, driven by agriculture and services sectors. Going forward, sustained demand from rural areas, an anticipated revival in urban consumption, expected recovery of fixed capital formation supported by increased government capital expenditure, higher capacity utilisation and healthy balance sheets of corporates and banks are expected to support growth. Headwinds from global trade disruptions continue to pose downward risks. Taking all these factors into consideration, Reserve Bank of India (RBI) has projected real GDP growth for FY 2025-26 at 6.5%.

All of these are also reflected in Morningstar DBRS rating upgrade of Indias long-term rating to BBB from BBB (low), while short-term rating was raised to R-2 (high) from R-2 (middle) on the basis of Indias structural reform efforts, fiscal consolidation, resilient banking system, and high potential growth rate. The successful implementation of reforms coupled with infrastructure investment and rapid digitalization have helped drive Indias recovery in the post-pandemic period, with GDP expanding on an average by 8.2% from FY 2021-22 to FY 2024-25.

Financial Institutions play a crucial role in fostering stability and implementing regulatory measures to reinforce households and businesses, particularly during periods of economic uncertainty. In India, Non-Banking Financial Company (NBFC) and HFCs have emerged as critical pillars of financial support for a significant segment of the population, including Small and Medium Enterprises (SMEs) and those historically underserved by traditional banking institutions.

As per ICRA, while most of the regulatory actions are expected to have some near-term impact on growth, they augur well for the sector in the long term, and most entities have the ability to absorb the near-term impact, if any, considering their strong balance sheets and healthy earnings profiles. Overall, the sector is expected to report healthy operating performance in over a longer term.

With the Indian economy weathering external shocks and exhibiting robust growth, NBFCs will continue to play an instrumental role in Indias growth story, by leveraging their deep knowledge of regional markets and offering tailored products and services as part of last-mile funding.

Financial performance of the Company

Your companys net worth on a standalone basis grew significantly by Rs.297.88 Lakhs to Rs.3757.21 Lakhs as of March 31, 2025, as against Rs.3459.33 Lakhs as of March 31, 2024. The increase in net worth was mainly due to an increase in profit. Your Company has been able to maintain its financial position during the current year. The gross amount of loans provided by the Company stood at Rs.4807.45 Lakhs as on March 31, 2025 as compared to Rs.5410.53 Lakhs as on March 31, 2024. The Companys borrowing has reduced from Rs.3221.07 Lakhs to Rs.2150.01 Lakhs. The Companys capital to risk weighted assets ratio was 64.41% for the year ended March 31, 2025 as compared to 53.68% for the year ended March 31, 2024. The Companys return on net worth ratio was 7.93% for the year ended March 31, 2025 as compared to 5.98% for the year ended March 31, 2024.

Risk Management

The Company aims to operate within an effective risk management framework to actively manage all the material risks faced by the Organisation and make it resilient to shocks in a rapidly changing environment. It aims to establish a consistent approach in management of risks and strive to reach the efficient frontier of risk and return for the Organisation and its shareholders.

Broad categories of risk faced by the Company are Credit Risk, Market Risk, Operational Risk and Reputation Risk. The risk management policies are well defined for various risk categories supplemented by periodic monitoring through the various committees of the Board.

Credit Risk: The credit aspects in the Company are primarily covered by the Credit Policy and Delegation of Authority approved by the Board of Directors. The Company measures, monitors and manages credit risks at individual borrower and portfolio level. During the course of the year, we have consistently recalibrated and re-aligned our underwriting criteria with the prevailing market environment across product lines and the associated digital scorecards, significantly leveraging our risk analytics capabilities. This helps us in refining our credit decisioning as well as granular monitoring of our existing portfolio.

Market Risk: Market risk management is guided by clearly laid down policies, guidelines, processes and systems for the identification, measurement, monitoring and reporting of exposures against various risk limits. The Asset Liability Management structure of the Company stipulates a broad framework for liquidity risk management to ensure that the Company is in a position to meet its liquidity obligations.

Operational Risk: The Company has put in place a comprehensive system of internal controls, systems and procedures for documenting, assessing and periodic monitoring of various risks and controls linked to various processes across the organisation.

Fraud Risk: The Company has adopted a robust Fraud Risk Management framework. It has an effective and very strong fraud risk governance mechanism that encompasses controls covering below objectives:

1. Prevent (reduce the risk of fraud from occurring);

2. Detect (discover fraud when it occurs); and

3. Respond (take corrective action and remedy the harm caused by fraud).

Changing business landscape and digitization has heightened the level of fraud risk in the environment arising due to new methods, schemes and technology. We continue to increase our investment in fraud prevention and detection capabilities to protect our stakeholders.

Compliance Risk: The Company has a Board approved Compliance Policy in place which lays down the roles and responsibilities of employees towards ensuring compliance with the applicable laws and regulations as also the role of the Compliance Department in monitoring compliance. The management of compliance risk is an integral component of the governance framework along with other internal control and risk management frameworks.

Reputation Risk: Reputational risk has been defined as the risk arising from negative perception on the part of customers, shareholders, investors, media reports that can adversely affect an organizations ability to maintain existing or establish new business relationships and continued access to sources of funding.

Our governance culture supported by sound risk management is aimed at ensuring we remain resilient during challenging periods and forge a sustainable future for the Organisation.

Opportunities and Threats

As of 2025, India has ascended to become the fourth-largest economy globally, with a nominal GDP of $4.19 trillion, surpassing Japan and trailing only the United States, China, and Germany. Projections indicate that India could become the third-largest economy by 2027, underscoring the nations economic momentum. This growth is underpinned by the governments continued emphasis on infrastructure development, private sector capital expenditure, the small and medium-sized enterprise sector. Additionally, rising disposable incomes and a burgeoning middle class are driving consumption across various sectors. Despite these advancements, Indias credit-to-GDP ratio remains on the lower side at approximately 75%, indicating significant room for credit expansion. This gap presents an opportunity for financial institutions to address credit demand, especially as digital public infrastructure matures, and credit appetite grows across various customer segments.

The drive to increase financial inclusion is expected to unlock opportunities in underserved and semi-urban/rural markets. Both established and emerging players are increasingly adopting a ‘Phygital approach, combining physical presence with digital capabilities to efficiently serve this new-to-credit customer base. Micro, Small and Medium Enterprises (MSME) sector presents another critical area of growth opportunity. Government initiatives aimed at boosting MSME activity, combined with the sectors difficulty in accessing credit through traditional channels, provide a compelling opportunity for NBFCs to offer customised financing solutions. The ongoing financial inclusion journey in India further amplifies this opportunity, especially through co-lending partnerships with banks, which enable NBFCs to reach broader borrower segments while optimising risk and capital allocation.

The lending industry has also adopted technology and data driven approach to lending in a very encouraging manner. Development of AI based tools for customer identification, evaluation, management, and collection of dues have revolutionized the way the lending industry has been operating. GenAI and Large Language Models (LLM) will be critical for scaling while ensuring a hyper-personalised experience is provided in a cost-effective manner. The emergence of account aggregators (AA) is also democratizing data with the result that credit decisioning can happen in a logical, consistent and fair manner.

Regulatory developments have also played a conducive role in strengthening the sector. The RBI has introduced several guidelines aimed at enhancing consumer protection and promoting responsible lending practices. Notable among these are directives on digital lending norms, guidelines to enhance transparency in multi-lender loan offers involving loan service providers, co-lending framework and increased risk weights on unsecured loans. Such measures are expected to foster innovation while ensuring adherence to high standards of corporate governance and compliance.

The sector also faces certain challenges in terms of elevated funding costs, margin pressures due to competitive lending rates, limited access to funds for smaller NBFCs and the recent uptick in stress in the unsecured loans segment and borrower overleveraging raises concerns about asset quality, necessitating vigilant risk management. From a macroeconomic perspective, the sector remains exposed to external risks, including liquidity constraints, political uncertainties, and fiscal instability. Navigating such volatility requires prudent risk management and diversified funding strategies.

Amidst this landscape, the Company continues to demonstrate robust performance, driven by its commitment to responsible lending, prudent risk management practices, and a maintaining a diversified liabilities base. The Company is focused on product diversification, strengthening presence in deeper markets and enhancing customer experience. The Company ensures strict adherence to regulatory guidelines, ensuring compliance in both letter and spirit. With a well-articulated strategy, a strong technological foundation, advanced digital and analytical capabilities, a comprehensive risk management framework, and a robust collections infrastructure, the Company is well-positioned to capitalize on the opportunities ahead.

Evolving regulatory landscape

Over the past few years, financial services as a sector have observed a positive change in terms of increased regulations and supervision in order to improve transparency and further strengthen the corporate governance. This is also true for NBFCs, as over the years, the sector has undergone considerable evolution in terms of size, complexity and interconnectedness within the financial sector. Some of the key regulations and guidelines aimed at bringing this regulatory convergence between the Banks and NBFCs are:

A) Digital Lending guidelines

RBI has issued a circular dated September 2, 2022 pertaining to "Guidelines on Digital Lending". The said guidelines stipulates compliance and disclosure requirements for regulated entities, digital lending apps and lending service providers, and converses the impact on various business models and entities such as payment aggregators, first-loss default guarantee arrangements, etc. The guidelines also aim to ensure fairness and transparency in digital lending and provide a framework for the protection of borrowers.

• RBI is ensuring that the ecosystem of financial services and fintech remains at the forefront of protecting sensitive personal data. The rules will also cause the ecology to be cleaned up. Lending operations with good intentions will prosper. Whether its preserving personal information, resolving consumer complaints, or decreasing information asymmetry, the regulations are a good step towards driving customer-centric innovation in the ecosystem.

B) Scale Based Regulations

The RBI vide its notification dated October 22, 2021, has introduced an integrated regulatory framework for Non-Banking Financial Companies ("NBFCs") under "Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs". The said SBR framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulations, etc., RBI has defined the regulatory structure for NBFCs, which shall comprise four layers viz., top layer, upper layer, middle layer, and base layer. As per SBR, the Company is in the Base Layer (NBFC-BL) as on March 31, 2025. The Company shall continue to ensure full compliance with all the requirements applicable to NBFC-BL under SBR within the prescribed timelines. Further, the Company has complied with and continues to comply with all applicable provisions of the Act, the Reserve Bank of India Act, 1934 and other applicable rules / regulations / guidelines, issued and amended from time to time.

Segment Wise / Product Wise Performance

The Company operates in single business segment i.e. NBFC, it has witnessed considerable growth in the last few years and is now being recognized as complementary to the banking sector due to implementation of innovative marketing strategies, introduction of tailor-made products, customer-oriented services and simplified procedures, etc.

Your Company is engaged only in lending and investment activities and no other business activities. Hence, the requirement of segment-wise reporting is just for one segment.

Internal Control Systems

The Companys internal control system is designed to ensure operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance with laws and regulations. The internal control system is supported by an internal audit process for reviewing the design, adequacy and efficacy of the Companys internal controls, including its systems and processes and compliance with regulations and procedures. Internal Audit Reports are discussed with the Management and are reviewed by the Audit Committee of the Board, which also reviews the adequacy and effectiveness of the internal controls in the Company. The Companys internal control system commensurate with its size and the nature of its operations.

Human Resources

The Companys current activities do not require engagement of significant human resource. However, requisite qualified and experienced personnel have been engaged to take care of organization need of human resource. The Company will engage requisite human resource as and when required.

Future Outlook

The future growth of the NBFC sector in India will be shaped by a confluence of factors, including policy support, regulatory oversight, and the continued digitization of the financial value chain. These elements will collectively contribute to the sectors ability to support the broader narrative of Indias economic expansion, making NBFCs indispensable to the nations growth story. In navigating the complexities of the global market landscape, our commitment remains steadfast in delivering sustainable value and preserving shareholder interests. Our lending strategies emphasize security selection, diversification, and a balanced approach to capitalize on emerging trends while safeguarding against potential risks.

Cautionary Statement

Statements in the Management Discussion and Analysis that address expectations about the future, including but not limited to statement about Companys strategy for growth, product development, market position, expenditures and financial results are forward looking statements and these forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized.

Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations, include among others, economic conditions affecting demand/supply and price conditions in global and domestic markets, changes in government regulations, Tax laws and other statutes and incidental factors.

By order of the Board, For MANSI FINANCE (CHENNAI) LIMITED

(ADIT S BAFNA)

Managing Director DIN: 00058663 New No. 9, Old No. 4, Place: Chennai Branson Garden Street, Date: 30-05-2025. Kilpauk, Chennai - 600 010.