Mathew Easow Research Securities Ltd Management Discussions

Economic Outlook

The Indian economy grew at 6.5% in FY 2024-25, compared to a revised 9.2% in FY 2023-24. This represented a four-year low due to a moderate slowdown within the Indian economy (marked by slower manufacturing growth and a decline in net investments). Despite the slowdown, India retained its position as the worlds fifth-largest economy. Indias nominal GDP (at current prices) was s 330.68 Trillion in FY 2024-25 (s 301.23 Trillion in FY 202324). Tire nominal GDP per capita increased from s 2,15,936 in FY 2023-24 to s 2,35,108 in FY 2024-25, reflecting the impact of an economic expansion.

Tire Indian rupee weakened 2.48% against the US$ in FY 2024-25, closing at s 85.47 on the last trading day of FY 2024-25. In March 2025, the rupee recorded the highest monthly appreciation since November 2018, rising 2.39% (arising out a weakening US dollar). Inflationary pressures eased, with CPI inflation averaging 4.63% in FY 202425, driven by moderating food inflation and stable global commodity prices. Retail inflation at 4.6% in FY 2024-25, was the lowest since the pandemic, catalysing savings creation. Indias foreign exchange reserves stood at a high of US$676 Billion as of April 4, 2025. This was the fourth consecutive year when rating upgrades outpaced downgrades on account of strong domestic growth, rural consumption, increased infrastructure investments and low corporate leverage (annualized rating upgrade rate 14.5% exceeded the decade-long average of 11%; downgrade rate was 5.3%, lower than the 10-year average of 6.5%). (Source: Crisil Ratings)

The global economy has entered a period of uncertainty following the imposition of tariffs on products imported into the US and some countries announcing reciprocal tariffs on US exports to their countries. This is likely to stagger global economic growth, the full outcome of which cannot be currently estimated. This risk is supplemented by risks related to conflicts, geopolitical tensions, trade restrictions and climate risks. In view of this, World Bank projected global economic growth at 2.7% for 2025 and 2026, factoring the various economic uncertainties. (Source: IMF, United Nations)

Industry Structure and Developments

India, as one of the fastest growing and largest economies globally, presents a conductive environment for the expansion of its credit market. Tire total NBFC credit outstanding stood at approximately ? 52 trillion as of December 2024 and is projected to cross ? 60 trillion by FY 2026, reflecting the sectors continued expansion. Amongst banks, NBFC and All India Financial Institutions, NBFCs have maintained 21-24% share of credit from FY 2017 to FY 2024. As India targets becoming $5 trillion economy in the coming years, the demand for financing is set to increase, underscoring the vital role of NBFCs in supporting economic growth and development. Retail loans, which accounted for 58% of total NBFC credit in December 2024, remain the cornerstone of growth. Unsecured business loans accounted for 28% of retail NBFC credit in December 2024. Earlier, RBI had raised risk weights by 25 bps to 125% on unsecured retail loans, due to indiscriminate growth, especially in personal loans, credit cards and unsecured business loans witnessed higher stress in FY 2025, leading to higher delinquencies and write-offs. Over the years, NBFCs have significantly strengthened their balance sheets, marked by reduced leverage and improved asset quality, with a notable shift towards the retail segment. NBFCs are effectively utilizing digital data to improve credit assessments and operational efficiency. The interest of equity investors remains strong and there is vast pool of debt capital overseas, which is largely untapped. With such a stable foundation, the sector remains well positioned to navigate the evolving regulatory environment while maintaining momentum.

Opportunities and Threats

The NBFC sector in India has been experiencing significant growth and transformation in recent years, driven by favourable regulatory policies and increasing demand for credit from underserved segments of the population. The Reserve Bank of India (RBI) has introduced various policies & framework to strengthen the supervision and governance of NBFCs. It provides a clear roadmap for the sector, it also presents challenges, such as increased compliance costs and operational challenges for NBFCs, especially smaller players. Additionally, the sector faces competition from traditional banks and new fintech players entering the market. To maintain their competitive edge, NBFCs will need to innovate and differentiate themselves. Overall, while the NBFC sector in India presents significant opportunities for growth, it also faces challenges that need to be addressed. Effective risk management, innovation, and compliance with regulations will be key for NBFCs to capitalise on opportunities and navigate potential threats, ensuring their continued role as a vital source of financing for underserved populations and a driver of economic growth. Despite the challenges, the sectors ability to adapt and embrace change will be critical for its sustained success in the evolving financial landscape.

RBI and Government restrictions: With more stringent norms governing the functioning of NBFC and certain government restrictions act as a hindrance in smooth functioning of NBFC.

Segment-Wise or Product-Wise Performance:

The Company is a Non-Banking Finance Company (NBFC). It is engaged in the business of lending and investment which is the only segment in the Company. Hence, the results for the year under review pertain to only financing activity.

Human Resources

People remain the most valuable asset of your company. Your company continued to build on its capabilities in getting the right talent to support different products and geographies and is taking effective steps to retain talent. A highly evolved Human Resource Policy has ensured a minimal rate of attrition amongst executives.

Internal Control System

Internal Control measures and systems are established to ensure the correctness of the transactions and safe guarding of the assets. The Company has put in place an adequate internal control system to safeguard all assets and ensure operational excellence. The system also meticulously records all transaction details and ensures regulatory compliance.

Your Management has put in place effective Internal Control Systems to provide reasonable assurance for:

• Safeguarding Assets and their usage.

• Maintenance of Proper Accounting Records and

• Adequacy and reliability of the information used for carrying on business operations.

The Companys internal control system is commensurate with its size and the nature of its operations.

Risks and Concerns

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

The very nature of the Companys business makes it subject to various kinds of risks. The Company encounters credit risk, market risks and operational risks in its daily business operations. Further the performance of the Company is dependent on the capital markets for its returns. Even though it is envisaged that Indian stock market will continue to do well, global concerns can result in sharp corrections.

Cautionary Statement:

Statement in the Management Discussion and Analysis and Directors Report describing the companys strengths, strategies, projections and estimates are forward-looking statements and progressive within the meaning of applicable laws and regulations. The actual results may vary from those expressed or implied, depending upon economic conditions, Government Policies and other incidental factors.