Munoth Capital Markets Ltd Management Discussions

A. Overview of the Indian Economy:

India remained among the fastest-growing major economies during FY 2025-26, supported by resilient domestic consumption, continued structural reforms, and deepening digital infrastructure. GDP growth held up despite global headwinds such as elevated interest rate uncertainty and geopolitical tensions. Steady GST collections, sustained foreign direct investment, and a broadly stable inflation trajectory continued to underpin macroeconomic stability, while Government programmes such as "Make in India" and "Digital India", together with infrastructure-led capital expenditure, reinforced the medium-term growth outlook.

For a financial services company such as Munoth Capital Market Limited ("the Company"), the broader economic environment continues to shape capital market activity, corporate earnings, and investor participation. Rising financial literacy, an expanding middle class, and the continuing shift of household savings towards formal financial instruments such as equities, mutual funds and SIPs remain long-term tailwinds for brokerage and advisory businesses. During the year, however, elevated market volatility, periods of subdued retail trading activity, and global uncertainty around trade and monetary policy tempered the pace of growth in capital market turnover, and this is reflected in the Companys financial performance for the year, discussed in the sections that follow.

B. Overview of Capital Markets:

During FY 2025-26, Indias capital markets continued to demonstrate resilience and remained an important channel for mobilising household savings and facilitating capital formation. The Indian equity market witnessed periods of volatility during the year amid global macroeconomic uncertainties, geopolitical developments, changes in interest-rate expectations and fluctuations in foreign portfolio investment flows. At the same time, domestic institutional participation and the continued shift of household savings towards financial assets provided underlying support to the market. Retail participation remained significant, supported by increasing internet and smartphone penetration, digital onboarding, dematerialisation of securities and wider access to online investment platforms. Regulatory measures introduced by SEBI during the year continued to focus on enhancing market integrity, transparency, investor protection and risk management across the securities market ecosystem.

Munoth Capital Market Limited operates as a stockbroker and depository participant, catering to retail and institutional clients with a focus on the micro-cap and small-cap segments. The Company is also empanelled with banks and insurance companies for institutional broking services. The continued expansion of Indias investor base, financialisation of savings and adoption of digital investment platforms present opportunities for business growth. However, the Company operates in a highly competitive environment, with increasing participation from technology-driven discount brokers. Brokerage income and trading activity remain sensitive to market volatility, investor sentiment and transaction volumes. The Company remains focused on strengthening client relationships, service capabilities, technology and compliance to support sustainable growth.

C. Outlook:

The outlook for the Company is watchful rather than assured. FY 2025-26 saw revenue from operations grow to approximately ^0.77 crore from ^0.56 crore in the previous year, reflecting improved brokerage and trading activity in parts of the year — notably a strong second quarter. However, the Company reported a net loss of approximately ^0.18 crore for the year, reversing the profit of ^0.18 crore recorded in F.Y. 2024-25, as expenses grew faster than income and operating margins turned negative. Return on capital employed and return on equity, already modest in prior years, moved into negative territory.

On the positive side, the Company continues to operate with an almost debt-free balance sheet, and its working capital cycle improved meaningfully during the year. Its niche focus on the micro-cap broking segment continues to offer a degree of differentiation from larger, more commoditized brokers. Sustaining growth and returning to profitability will depend on the Companys ability to convert episodic trading-volume spikes into steadier operating performance, control costs, and broaden its client base, while continuing to navigate the inherent volatility of the small-cap and micro-cap segments.

D. Indian Stock broking Industry:

The Indian stock broking industry continued to evolve during the year, with digitalization, rising financial literacy, and increasing retail participation through online trading platforms and SIPs remaining structural growth drivers. Regulatory reforms by SEBI aimed at strengthening transparency, risk management, and investor protection continued to shape industry practice. The industry remains highly competitive and increasingly dominated by large, well-capitalized, technology-led players offering integrated financial services at low cost, a dynamic that continues to pressure smaller and traditional brokerage firms, including the Company, to invest in technology, compliance, and client engagement to remain relevant.

According to industry estimates, the India securities brokerage market was valued at approximately USD 4.25 billion in 2025 and is projected to reach approximately USD 5.75 billion by 2029, implying a compound annual growth rate of around 7.89% over the period.

Overall, the security brokerage market in India is dynamic and influenced by a combination of economic, regulatory, technological, competitive, demographic, and global factors. Adapting to market dynamics and meeting client needs are key challenges and opportunities for brokerage firms operating in India.

E. Opportunities and Threats:

OPPORTUNITIES:

> Increasing Market Participation: The Indian stock market has seen increased retail investor participation, driven by rising financial literacy and digitalization. This trend presents opportunities for MCML to expand its client base and service offerings.

> Strengthened Working Capital Efficiency: Working capital days improved to approximately 190 during the year, a meaningful reduction from the prior year, freeing up resources for operations.

> Increasing Shareholder Participation: The number of shareholders increased over the year, reflecting sustained investor interest even amid a challenging earnings environment.

> Strengthened Financial Position: Debt-free balance sheet and allows flexibility for future investments or expansion.

> Strengthening Technology Infrastructure: The rise of fintech, AI, and blockchain technologies can enhance Companys service delivery, improve operational efficiency, and attract a younger demographic of investors.

THREATS:

> Market Volatility: Fluctuating markets can lead to inconsistent profitability, affecting investor confidence and Companys financial performance.

> Regulatory Changes: Frequent changes in regulations can create compliance challenges and impact operational costs for Company.

> Intense Competition: Faces strong pressure from larger brokerage firms.

> Global economic uncertainty: International financial-market instability can cause capital outflows, currency fluctuations and volatility in Indian markets.

> Changing investor preferences: Growing preference for passive investments, mutual funds, ETFs and automated investment platforms may reduce demand for traditional broking services.

F. Segment-wise or product-wise performance:

The Company continues to operate in a single reportable segment, namely Depository Participant and Share Broking activities. Accordingly, no separate segment-wise reporting is required under the applicable accounting standards.

G. Future Outlook:

Having returned to revenue growth in FY 2025-26 but reported a net loss for the year, the Companys near-term priority is to restore profitability while sustaining the top-line momentum. This will require continued discipline on operating costs, deeper client acquisition and retention efforts, and prudent risk management, particularly given the Companys concentration in the more volatile micro-cap and small-cap segments. Management remains cautiously watchful of the nearterm outlook, balancing the structural growth opportunity in Indian capital markets against the Companys own scale and competitive constraints.

H. Internal control systems and their adequacy:

Munoth Capital Market Limited has continued to maintain an internal control framework designed to safeguard the integrity of its financial reporting, ensure compliance with applicable laws and regulations, and manage operational risk. These controls, covering client transactions, risk management, compliance, accounting, and reporting, are periodically reviewed and updated to reflect changes in the regulatory environment and the Companys business operations.

I. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the Financial Year 2025-26 is described in the Directors Report of the Company.

J. Material developments in Human Resources / Industrial Relations front including number of people employed:

The Company continued to maintain a cordial employer-employee relationship throughout the year under review, and human resources continued to receive focused management attention.

K. Material Financial and Commercial Transactions:

During the year there were no material financial or commercial transactions.

L. Key financial ratios:

In accordance with Regulation 34 read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, the Company is required to disclose details of significant changes (of 25% or more as compared to the immediately preceding financial year) in key sector-specific financial ratios. During FY 2025-26, the Company recorded significant changes in several ratios, notably a decline in net profit margin, operating profit margin, return on capital employed, and return on equity, as the Company moved from a net profit to a net loss for the year, alongside an improvement in working capital days. Complete details of these ratios, together with explanations for the significant changes, are set out in the Financial Statements forming part of this Annual Report.

M. Human Resources:

The Company continues to regard its employees as a vital asset and maintains a focused, skilled workforce to support its operations in the financial services sector. It promotes a culture of performance, compliance, and continuous learning through regular training and skill development initiatives, with an emphasis on adaptability, teamwork, and professionalism to meet evolving market and regulatory demands.

N. Caution Statement:

Statements made in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, and expectations may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied, depending on economic conditions, changes in Government regulations, amendments to tax laws, and other internal and external factors beyond the Companys control.