Morarka Finance Ltd Management Discussions

The global economic environment ispoisedforsignificantshifts in 2025, driven by evolving market dynamics, geopolitical realignments and structural transformations across industries. Global economic activity is expected to keep its momentum in 2025, but with a mix across regions. Inflation anticipated to steadily ease, and monetary policymakers are expected to recalibrate, though cautiously.

As per the OECD Economic Outlook, Interim Report March 2025, Global GDP growth is expected to moderate from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026, with higher trade barriers in several G20 economies and increased policy uncertainty weighing on investment and household spending.

The high level of geopolitical and policy uncertainty at present brings with it substantial risks to the baseline projections. One possible risk is the escalation of trade restrictive measures. An illustrative exercise, where bilateral tariffs are raised further on all non-commodity imports into the United States with corresponding increases in tariffs applied to non-commodity imports from the United States in all other countries, shows that global output could fall by around 0.3% by the third year, and global inflation could rise by 0.4 percentage points per annum on average over the first three years. The impact of these shocks would be magnified if policy uncertainty were to increase further or there was widespread risk repricing in financial markets. These would add to the downward pressures on corporate and household spending around the world.

As per the OECD Economic Outlook, Interim Report March 2025, the global economy remained resilient in 2024, expanding at a solid annualised pace of 3.2% through the second half of the year. However, recent activity indicators point to a softening of global growth prospects. Business and consumer sentiment have weakened in some countries. Inflationary pressures continue to linger in many economies. At the same time,policyuncertaintyhasbeenhighandsignificantrisks remain. Further fragmentation of the global economy is a key concern. Higher-than-expected inflation would prompt more restrictive monetary policy and could give rise to disruptive repricing in financial markets. On the upside, agreements that lower tariffs from current levels could result in stronger growth.

The report on Global Economic Outlook, January 2025, Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development - with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters.

UN Trade and Development (UNCTAD), in its new report, "Trade and Development Foresights 2025 – Under pressure:

Uncertainty reshapes global economic prospects" has stated that Global growth is expected to slow to 2.3% in 2025, placing the world economy on a recessionary path. This will lead to trade policy shocks, financial volatility and a surge in uncertainty that risk derailing the global outlook.

The International Monetary Fund (IMF) in its World Economic Outlook, 2025, has projected Indias growth to be solid at 6.5 percent in 2025 and 2026, holding that it is "in line with potential".

The Reserve Bank of India has projected real GDP growth at 6.5 per cent for 2025 26, maintaining the same rate as estimated for 2024 25, following a strong expansion of 9.2 per cent in the preceding year. The quarterly projections stand at 6.5 per cent in Q1, 6.7 per cent in Q2, 6.6 per cent in Q3, and 6.3 per cent in Q4. Accordingly, Consumer Price Index (CPI) inflation for 2025 26 is projected at 4.0 per cent, with quarterly estimates at 3.6 per cent in Q1, 3.9 per cent in Q2, 3.8 per cent in Q3, and 4.4 per cent in Q4.

The Monetary Policy Report of April 2025, reflects a balanced approach by the Reserve Bank of India (RBI) to support growth while maintaining price stability. With GDP growth for 2025 26 projected at 6.5 per cent and inflation expected to remain within the 4 per cent target band, the report signals cautious optimism despite global uncertainties.

The Indian financial landscape has witnessedsignificanttransformation over the past decade, with Non-Banking

Financial Companies (NBFCs) emerging as pivotal players in driving economic growth. By focusing on the underserved and unbanked segments of the population, NBFCs have democratized access to credit, catalysing the growth of the retail loan segment. According to recent data from the Reserve Bank of India (RBI), NBFCs accounted for nearly 25% of the total credit in the financial system, with retail cater to specific customer segments, including rural areas and urban low-income groups. Digital-first NBFCs, or fintech NBFCs, have particularly disrupted the market by leveraging loan approvals, personalized offerings, and efficient risk management.

Indian non-banking financial companies (NBFCs) are expected to adjust their funding strategies in the upcoming financial year, driven by the Reserve Bank of Indias (RBI) decision to ease certain lending regulations. This move may encourage banks to increase their funding to NBFCs.

Technology will remain the cornerstone of NBFC growth in 2025. Artificial intelligence (AI) and machine learning (ML) will enhance credit risk assessment, while blockchain-based solutions will ensure transparency and security in transactions. Digital lending platforms will continue to dominate, offering seamless experiences to customers. The untapped potential of Tier-2 and Tier-3 cities will drive NBFC expansion. The RBI has been proactive in regulating NBFCs to ensure stability and mitigate risks. Stricter compliance requirements and frameworks for risk management will strengthen the sector, fostering sustainable growth. Initiatives like co-lending models between banks and NBFCs will further enhance credit penetration.

Despite the positive outlook, the NBFC sector faces challenges such as liquidity constraints and intense competition. Regulatory oversight, while essential, could pose compliance burdens for smaller players. Additionally, the risk of non-performing assets (NPAs) remains a concern, particularly in the wake of global economic uncertainties.

There is a growing realisation of the significance of NBFCs in the industry, and in promoting Indias economic growth.

There are huge growth opportunities for NBFCs because of the great advantages it offers; though there are some issues regarding the NBFCs. Additionally, NBFCs can transform their operations by utilising digital tools and resources, which not only reduces their environmental impact but also improves governance and resource management.

Risk is synonym with NBFCs which is inherent part of their business. Your Company is also subjected to various types of such risks. Your Company has identified these risks and guarded itself by adopting a range of strategies and measures to reduce the impact of such risks. Few risks listed are as follows:

1. Operational Risk

It arises when the flow of and controls over the operations of the company are lacking, which has adverse impact on of the company. The Company has placed internal controls to thecontinuityofbusiness,reputationandprofitability mitigate these risks.

2. Credit Risk

It is a risk of default or non-repayment of loan by a borrower which involves monetary loss to the company, both in terms of principal and interest. The Company does not have any loans so this is not applicable to our Company.

3. Business Risk

Morarka Finance being a NBFC is exposed to various external risks which have direct bearing on the sustainability and profitability of the Company. Foremost amongst them are Industry Risk and Competition Risk.

4. Regulatory Risk

It is the risk of change in laws and regulations materially impacting the business. The Company takes compliance very seriously & is strict in adherence to various statutory laws.

5. Human Capital Risk

Human capital risk is the gap between the goals of the organisation and the skills of its workforce. To mitigate this our company regularly provides training & awareness programmes to its employees.

6. Cybersecurity Risk

Cybersecurity risk is the probability of exposure or loss resulting from a cyber-attack or data breach on your organization. To deal with this our Company uses Internal servers & encryption so that data cannot be tampered with or accessed by any outsider.

In 2025, NBFCs face a complex and dynamic risk landscape, marked by transition and uncertainty. By understanding and addressing the top risks of regulatory shifts, cybersecurity, new technology, economic uncertainty and geopolitical tensions, your Company will focus on enhancing their resilience and adaptability. We believe that with proactive risk management, continuous monitoring and strategic planning we will be able to navigate these risks and challenges. The overall investment philosophy stems from our objective of delivering superior risk adjusted returns to investors over an extended time frame. The investment philosophy is rooted in a set of well-established but flexible principles that relies extensively on fundamental research. It is our belief that over the time, stock prices will reflect a business underlying intrinsic values and its long-term prospects. As a result, our near strategy is to arrive at a comprehensive understanding of a companys business including the nature of its interactions with customers, suppliers, competitors and regulators.

While doing so our strategy is to rely on various earnings multiples besides analyzing private market value and appropriate regional and global comparisons. The basic principles that serve as the foundation for the above investment approach are managing risk, maintain a balanced outlook on the market and focus on the long term.

The company, in current fiscal 279.84 lakhs as againsthasmadeprofits profit of 631.59 lakhs for the Previous year.

The revenue from the dividend, rental income and management consultancy fees will be contributing regularly and steadily rather than dependence on volatile capital market revenue generation.

The Board formally accepted steps for framing, implementing and monitoring the risk management plan for the company.

The main objective is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. In todays challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. Your Company has identified these risks and guarded itself by adopting a range of strategies and measures to reduce the impact of such risks.

The Company is a Non-Banking Finance Company, its core business is financial business. Hence, there are no separate segments for reporting as per Accounting Standards issued by the Institute of Chartered Accountants of India.

For enhanced performance of any organization, it is important that its human resources are abreast of new developments and possess relevant skill sets. To realize this, the emphasis on training and development activities has been increased. Executives were nominated for various program and seminars at local and national levels by premier institutes.

The statements in above analysis, describing the companys projections, estimates, expectations and predictions may be ‘forward looking statements within the meaning of applicable security laws and regulations. The actual results may differ from those expressed or implied. The important factors that may impact the operations of the company may consist of economic developments - globally and locally, government regulations, tax regimes and other related factors.