Muthoot Capital Services Ltd Management Discussions

OVERVIEW

Muthoot Capital Services Limited is pleased to present this years Management Discussion and Analysis Report, which elucidates the actions taken by the Company to move closer to its vision. It illustrates the strategic objectives and efforts invested in a bid to achieve long-term objectives. The management commits itself to creating value and this section analyzes the processes and procedures implemented to get optimum resu Its.

This Report provides a comprehensive look into the organizations performance in light of the macroeconomic landscape. Through interpreted financial ratios and economic indicators, investors would gain insight into the views of management. These may be associated with some risks and uncertainties such as those involved in the Companys development, alterations in regulatory law, economic climate and other incidental business elements.

This section also outlines future goals and the strategies for upcoming projects.

1. Global Economic Environment

The global economy sustained moderate growth in 2024 and early 2025 with the International Monetary Funds World Economic Outlook projecting a global GDP rise of 3.3%for 2025 and 2026. Advanced economies growth moderated to 1.4%, while emerging economies, led by India and Southeast Asia, grew around 3.7%. Global inflation remains above pre-pandemic averages, with the OECD expecting world inflation to touch 4.2% in 2025, driven by prolonged supply chain disruptions and energy costs.

Geopolitical tensions (notably in Eastern Europe and the Middle East), realignment of supply chains (nearshoring, diversification), and tighter financial conditions have resulted in cautious monetary policy worldwide. The World Bank, in its 2025 outlook, highlighted a downward revision in global growth forecasts given persistent inflation and monetary policy tightening.

2. Indian Economy Overview

India continued to outperform, cementing its reputation as the worlds fastest-growing major economy. According to the National Statistical Office (NSO) and Deloitte Economic Outlook (May, 2025):

- Indias real GDP rose 7.2% in Q4 FY24-25 development. Nominal GDP expanded by 9.8% for the period. Q4 ((Jan25 - Mar25) GDP growth was 7.4% year-on-year

- RBI projects FY25-26 GDP growth at 6.5%, with nominal expansion nearing 10%.

- Unemployment declined with the Worker Population Ratio reaching 51.2% as of June, 2025.

- Domestic demand, infrastructure investments, and rapid digitalization fuelled growth.

Indias resilience owes much to strong private consumption, ongoing government infrastructure spend (notably roads, railways, logistics), robust FDI inflows and a healthy financial system, as seen in the last several quarters.

3. Reserve Bank of India (RBI) Insights

The RBI maintained its focus on macro-financial stability, keeping the policy repo rate at 6.50%through FY24-25 to contain inflation. Monetary policy continues in a “withdrawal of accommodation” stance, balancing the need for price stability (headline CPI inflation remained under 5%) with supportive growth.

Key highlights from the RBI Financial Stability Report (2025):

- Banking gross NPA ratio at **2.3% as of March 2025**-among the lowest in a decade-and likely to stay below 3% for the next two years.

- RBI intensified scrutiny on NBFCs, focusing on liquidity risk, asset quality, digital lending practices and consumer protection.

- Recent regulatory guidance also emphasizes responsible credit growth and technology adoption in the sector.

4. Non-Banking Financial Companies (NBFCs)

According to the KPMG 2025 NBFC Report, the sector saw outstanding credit reaching ^ 52 trillion by

December, 2024 and is set to cross ^ 60 trillion by FY 2026. Credit growth moderated to 13-15% in FY2025,

down from previous peaks, reflecting tighter standards and more selective lending.

Additional NBFC sector themes:

- Digitalization: Over 96% customer satisfaction reported with digital onboarding and service transparency.

- Asset quality remains stable; NBFC GNPA ratios have remained contained compared to historical cycles.

- Vehicle, retail and MSME loans drive much of the NBFC asset growth because of reach in Tier 2/3 cities and underbanked regions.

- The liability mix as of Dec, 2024 is well diversified, supporting sustained growth.

NBFCs innovation in credit scoring, fintech collaborations, and focus on rural /semi-urban expansion powered much of the new credit origination, even as regulatory oversight increased in areas such as digital lending and fair practice codes.

5. Auto Loan Industry in India: Segmented Overview

Segment	2024—25 Market Size	CAGR / YoY Growth	Key Data Points
Two Wheeler Loans	USD 8.4bn	6.5% (projected to 2033)	FA DA: 4.7% YoY growth in two- wheeler retail sales
Used Car Loans	USD 8.8bn	13% (CAGR to 2033)	37%financing penetration in used car sales
Commercial Vehicle Loans	NA	12.7% YoY in MCVs	FA DA: MCV sales +12.7% YoY in April 2025

^References: IMFWorld Economic Outlook (April 2025, data as of Q1 2025), World BankGlobal Economic Prospects (3an, 2025).*

Ministry of Statistics and Programme Implementation (MoSPI) Press Release, May 30, 2025, PIB Press Release 3uly 2025, BBC News May 2025, Deloitte India Economic Outlook May 2025*

*References: RBI Monetary Policy Statement, March 2025; RBI Financial Stability Report 3an, 2025*

*References: KPMG NBFC Report 2025 (data to March, 2025), RBI sector releases, Deloitte India 2025 Outlook*

COMPANY PERFORMANCE: REGAINING MOMENTUM

The Company has been making rapid strides towards realizing its strategic objectives of AUM growth, improved Asset quality and increasing market share. During the fiscal, disbursements have grown from ^ 1,43,842 lakhs in FY24 to ^ 2,64,209 lakhs in FY 25 while CNPA reduced from ^ 20,504 lakhs to ^ 14,920 lakhs. The net profit for the year FY 25 stood at^ 4631.47 lakhsfrom ^ 12,249.46 lakhs in FY 24.

Focused approach

One of the key strengths of the Company is its focus on core business. The Company anticipates success by deploying effective growth strategies to promote its current and future product offerings. Consumer durables, two-wheeler financing, top up loans and corporate loans have been specified for this purpose.

The policies of the Company are adjusted to reach the desired goals in view of any probable eventualities. To achieve the desired objectives, the team will strive hard to identify where demand exists and compensate for any deficient supply.

This strategy has allowed the Company to raise disbursement numbers within Two-Wheeler Loan segment despite subdued two-wheeler sales by concentrating on expanding penetration among sub-dealers and multi-brand outlets. Geographically too, the portfolio is well spread out. Moving ahead, the Company will strive for a well-diversified mix of retail, consumer, and commercial business while also focusing on long term profitability through a combination of cross selling productsto existing customers and building a sustainable commercial vertical. Finally, its key target population remains mid income self-employed people from semi-urban and rural regions.

Strengthened technology

The Company has scaled up its digital initiatives across the value chain and leveraging its existing physical presence to reduce overall costs and improve profitability.

The use of digital technology has revolutionized the way customers find, navigate, purchase and interact with products and brands. Because of this, most operations are completed using apps or NACH. This transformation has led to a marked increase in our digital sources and collections, which has been a major benefit for us as well as our customers. Our mobile-based loan approval process also offers a swift response time, meaning information is more readily available from any location at anytime. Not only does this improve the customer experience but it also aids in improving the Companys reputation by enabling efficient operations in remote areas. To ensure regulatory compliance across all channels, we apply risk and compliance procedures. Last but not least, analytics are integral to optimizing the user experience and further boosting our brand image.

The Company has also utilized technology to boost engagement with channel partners and customers alike. Al, machine learning, and analytics are being applied to various products in orderto boost customer lifetime value on the underwriting and collections end.

Improved Collections

The Company introduced pioneering solutions with the help of technology and analytics to enhance the effectiveness and efficiency of debt collection. Strategies-based methods were employed while data-driven actions were implemented to control the number of overdue accounts. Artificial intelligence was also utilized for reducing credit losses. Additionally, customers and debt collectors were divided into segments in accordance with local areas, in order to optimize the distribution of debt collection services.

The collection teams have been investing significantly in urging customers to make electronic payments via payment gateways, which has also contributed to improvement in recoveries.

Steadfast Financial Discipline

The Company has kept strong ties with its financial partners in order to guarantee availability of adequate credit for Company functions. Investors / lenders have been receptive even during difficult times, displaying their trust in us. Furthermore, efforts are being made to reduce operational costs and properly monitor credit transactions to minimize chances of fraud/default and related losses.

Quality based credit underwriting

The Company has been diligent in maintaining the quality of its portfolio through expanded prudent choice of customers. This prevents delinquencies which is evident in our reduced NPAs during FY25.

Vigilant fraud detection and prevention

The Company has implemented several risk mitigation strategies to combat potential fraud. An alert system is in place at the customer, dealer and employee level as well as a fraud detection algorithm for enterprise operation. In addition, fraud identification techniques have been put into effect to prevent fraudulent activities from taking place.

FINANCIAL PERFORMANCE OF THE COMPANY

Financials for the last 5 years at a glance

{l in Lakhs)

1 Financial year ended March 31	2021	2022	2023	2024	2025
Operating Results
Disbursements	75,034	1,14,710	1,31,828	1,43,842	2,64,209
Total Revenue	50,504	41,130	44,310	40,141	47,650
Profit Before Tax (PBT)	6,950	-21,571	10,880	16,434	6,040
Profit After Tax (PAT)	5,219	-16,183	7,793	12,249	4,631
Assets
Fixed Assets (including assets leased out)	281	196	213	602	976
Investments	1,635	2,740	4,554	10,734	11,211
Deferred tax asset	2,144	9,978	9,240	5,538	3,979
Net stock on hypothecation	1,74,911	1,50,561	1,51,656	1,67,477	2,92,716
Other loans (including interest accrued)	12,250	9,140	16,414	18,027	5,297
Other assets	64,761	37,237	805	29,038	44,271
Total Assets	2,55,982	2,09,852	1,82,882	2,31,417	3,58,450
Liabilities
Equity	1,645	1,645	1,645	1,645	1,645
Reserves and Surplus	54,311	39,488	47,281	59,530	64,161
Borrowings (including interest accrued)	1,94,699	1,62,468	1,89,127	1,66,009	2,85,257
Other liabilities	5,327	6,251	5,481	4,233	7,387
Total Liabilities	2,55,982	2,09,852	2,43,534	2,31,417	3,58,450
Key Indicators
Earnings Per Share (in ^)	31.30	-98.46	47.84	74.58	27.81
Book Value Per Share (in ^)	340.20	250.10	297.46	371.94	400.10
CRAR (%)	31.78	19.73	27.92	31.30	22.25
GNPA (%)	12.06	25.93	20.55	10.17	4.88
NNPA (%)	6.18	5.81	2.58	3.40	2.30

Financial Performance

The Companys Assets under Management (AUM) primarily comprise vehicle loans, of which two-wheelers constitute the major portion. The Company also has a wholesale loan book, which as on March 31, 2025 is only 2% of the total book. Overall, AUM as on March 31, 2025 is^ 3,06,043 lakhs (including assigned loan of ^ 266 lakhs), as against ^ 2,01,817 lakhs (including assigned loan of ^302 lakhs) atthe end of the previousyear (FY 24). The disbursements for the year ended March 31,2025 is ^ 2,64,209 lakhs as against ^1,43,842 lakhs for the year ended March 31,2024.

The Companys income comprises both income from vehicle financing and corporate loans. The Company has earned an income of ^ 47,650 lakhs in the current year (FY 25), compared to ^ 40,141 lakhs in the previous year. During the year, the expense of the Company has increased from ^ 33,292 lakhs in previousyear to ^ 41,610 lakhs in current financial year. It comprises of various components, of which finance costs constitute the major portion, totaling at ^ 22,356 lakhs, followed by other expenses of ^ 9,266 lakhs (including ^1,938 lakhs as impairment on financial instruments), employee costs of ^ 9,511 lakhs, and depreciation and amortisation of ^477 lakhs.

	Year Ended in Lakhs)
Financial Snapshot	March 31, 2025	March 31, 2024	% Growth	Reasons for Variance
Disbursement (all Loans) [1]	2,64,209.00	1,43,842.00	83.68%	The overall market share has increased due to the significant increase in self-sourcing through dealer channel and alternate channels.
AUM atthe end of the period (own book) [2]	3,05,776.21	2,01,514.58	51.74%	The overall increase in disbursements of twowheeler, used cars and commercial vehicles has led to the growth in the portfolio by over 50%.
Average AUM (own-book excluding interest accrued) [3]	2,94,973.90	1,92,968.67	52.86%	The overall increase in disbursements of twowheeler, used cars and commercial vehicles has led to the growth in the portfolio by over 50%.
Total Debt [4]	2,85,323.23	1,66,142.09	-71.73%	Due to significant increase in disbursement, it has led to raising of funds through structured markets in the form of term-loan, NCDs, CPs and PTCs.
Net worth [5]	65,806.36	61,174.90	7.57%	With equity remaining unchanged, the reserves and surplus has increased due to increase in profitability.
Total Interest and Fee Income [6]	47,649.53	40,140.77	18.71%	Increased income due to higher disbursement ensuring optimum IRRand processing fee.
Finance Expenses [7]	22,356.03	16,756.41	33.42%	Higher finance cost due to higher disbursement leads to increase in borrowing cost.
Net Interest Income (Nil) [8] =[6]-[7]	25,293.50	23,384.36	8.16%	As the overall self-sourced share of the Company increased, it has led to the increase in the blended IRR of the Company that has helped in improving the Nil
Operating Expenses [9]	17,315.78	15,782.97	9.71%	Increase in expense on account of increase in sourcing fee and credit cost as a result of increase in disbursement, increase in software expense due to improved technology and ensure data security, increase in salary cost etc
Loa n Loss & Provisions [10]	1,937.95	752.16	157.65%	Asthe portfolio increased, the delinquencies has proportionately increased for which the Company has provided the impairment provisions. The total provisioning of the Stage 3 assets remains at 60%
Profit Before Exceptional Items And Tax [11]=[8]- [9]-[10]	6,039.77	6,849.23	-11.82%	The Company has heavily invested on the software front and the employee front while introducing the two new SBUs, Used Cars and CVs. This has led to increase in the operational expenses which has marginally brought down the profitability
Exceptional Items [12]	-	9,584.65
Profit/(Loss) Before Tax [13] =[H]+[12]	6,039.77	16,433.88	-63.25%	The Company has heavily invested on the software front and the employee front while introducing the two new SBUs, Used Cars and CVs. This has led to increase in the operational expenses which has marginally brought down the profitability
Profit/(Loss) After Tax [14]	4,631.47	12,249.46	-62.19%	The Company has heavily invested on the software front and the employee front while introducing the two new SBUs, Used Cars and CVs. This has led to increase in the operational expenses which has marginally brought down the profitability
Ratios
Total OP EX to Nil [15] = [9]/ [8]	68.46%	67.49%		Growth in income at optimum cost leads to slight increase in income and increase in opex due to increase in sourcing, credit cost and technology related expenses.
Loan loss to average AUM [16] -[10] / [3]	0.66%	0.39%		This is in direct relation to the seasoning of the portfolio, the new portfolio created last year has lower delinquency and the impact of seasoning on that portfolio can be seen in the later part of the current year. This led to the substantial increase in the percentage which is in line with the overall AUM growth.
Return on average AUM nwP4]/[3]	1.57%	6.35%		The Company has heavily invested on the software front and the employee front while introducing the two new SBUs, Used Cars and CVs. This has led to increase in the operational expenses which has marginally brought down the profitability
Interest Coverage Ratio [18] =[11] + [7] / [7]	1.27	1.98		The Company in this year as well has gone from strength to strength, and has been able to showcase a better interest coverage ratio which has instrumental in giving a comfort to the stakeholders.
Current Ratio	1.07	1.07
Debt-Equity Ratio [19] = [4] / [5]	4.34	2.72		Due to significant increase in the borrowings for the purpose of meeting the disbursement requirement, the ratio has gone up.
Operating Profit Margin/ Net Interest Margin on loan book [20] = [8] / [3]	8.57%	12.12%		The impact of the increase in the operational cost due to new SUBs has resulted in the fall of this ratio.
Net Profit Margin [21] = [15]/[6]>	9.72%	30.52%		Last years profits and earnings were including the extraordinary income on account of sale of pool through ARCs which has significantly increased the previous year profits and earnings. This year profits were results of operational income net of operational expenses and no exceptional item has been booked.
Return on (Average) Net Worth	7.29%	22.25%
Earnings Per Share (in ^)	27.81	74.58

Capital Adequacy Ratio (CRAR)

As on March 31, 2025, the CRAR is 22.25% of the aggregate risk weighted assets on the Balance Sheet, which is comfortably above the regulatory minimum of 15%. Of the CRAR, 22.06% is from Tier-1 Capital and Tier-11 is 0.19%.

a) Borrowing Profile (excluding interest accrued)

	March 31, 2025		March 31, 2024
Particulars	Amount in Lakhs)	% of Total	Amount (T in Lakhs)	% of Total
Loan from Bank	1,03,418.14	36.20%	78,822.26	48.1%
Loan from Financial Institution	18,597.20	6.51%	7,271.76	4.4%
Subordinated Debts	142.24	0.05%	647.67	0.4%
Non-Convertible Debentures / Market Linked Debentures	98,675.00	34.54%	40,900.40	25.0%
Public Deposit	4,045.111	1.42%	3,188.03	1.9%
Securitization	38,951.83	13.64%	24,429.46	14.9%
Commercial Paper	21,831.77	7.64%	7,860.17	4.8%
Others	0	0.00%	678.50	0.4%
Total	2,85,661.29	100.00%	1,63,798.24	100.0%

The Companys total external borrowings (excluding interest accrued) has increased to ^ 2,85,661 lakhs as of March 31, 2025 from ^1,63,798 lakhs as of March 31,2024, an increase of 74% to support the business and to ensure adequate liquidity.

With three consecutive increases in repo rates and corresponding hikes in MCLR rates, our average rate of interest has risen to 9.95% during the year. The Company explored different avenues to raise funds in meeting its disbursement requirement during the year and also maintained a positive outlook by increasing the long term exposures. To substantiate this, the Company during the year has been able to source ^1,06,327.52 lakhs from Banks/OFI by way of Working Capital loans and securitization. Also, the Company has issued Non-Convertible Debentures worth ^ 79,100 lakhs and Commercial paper amounting to ^ 79,533.70 lakhs during the year.

b) Assets under Management

The own-book AUM as on March 31, 2025 stood at ^ 3,05,777 lakhs (i.e., ^ 3,06,043 lakhs less assigned portfolio on 266 lakhs) against own-book AUM of ^ 2,01,515 lakhs (i.e., ^ 2,01,818 lakhs less assigned portfolio on 302 lakhs) as on March 31, 2024.

Today, the Company has presence for auto loan financing in 22 States. The geographical distribution of hypothecation loans (including securitized portfolio) is as given below: ^ _Lakhs^

1 Zone	Active clients	Regular (T)	NPAOO	% of NPA	Zone wise % 1
EAST	51,373	28,857.18	2,952.68	9.28%	10.59%
NORTH	85,112	50,615.50	4,485.06	8.14%	18.34%
SOUTH	1,74,678	97,551.71	5,800.27	5.61%	34.40%
WEST	25,711	14,534.81	1,668.41	10.30%	5.39%
CO LENDING	2,02,967	93,958.62	-	0.00%	31.28%
Crand Total	5,39,841	2,85,517.82	14,906.42	4.96%	100.00%

MCSL is using 4,000+ branches of flagship Company of the Group, Muthoot FinCorp Limited, which enabled itto service its 5 lakh+ live customer base with ease along with 5,000+ dealer points in all states. The Company has further diversified its portfolio of vehicle financing and also moved to the used-car space and commercial vehicle space, aside from exploring other channels of distribution and maintaining a nominal proportion of corporate loan book.

The disbursements of hypothecation auto loans, along with number of loans, over the last 5 years is given in the chart below:

c) Cost and Profitability Analysis

The Cost and Profitability analysis shows that the Company has earned profit with improvement in collection and increase in disbursement. The finance expenses were higher than what was required in view of the Company having to draw additional funds than what was required to meet sanction norms and also maintain liquidity and thereby incurred higher finance costs. The Opex has reduced due to decrease in collection cost but employee benefit expenses has increased because of increase in manpower as well as incentivizing the employees for improved collection. The Company has not provided any extra provision during the year for ECL as there is improvement in collection resulted in maintains an NN PA of 2.30%.

d) Spread Analysis

The Company has been able to maintain its gross and net spread at reasonable levels:

(T in Lakhs, excluding interest accrued)

1 Particulars	March, 2025		March, 2024 1
Daily Average Loan Book Size	2,94,974		1,92,969
Income from Operations	47,650	16.2%	40,141	20.8%
Direct expense (including interest, brokerage, dealer / MFL incentive,field investigation charges)	28,721	9.7%	19,034	9.9%
Cross Spread	18,929	6.4%	21,107	10.9%
Personnel Expenses	9,511	3.2%	7,997	4.1%
OPEX (including depreciation etc.)	1,440	0.5%	5,508	2.9%
Total Expenses	10,951	3.7%	13,505	7.0%
Pre-Provision Profits	7,978	2.7%	7,602	3.9%
Loan Loss and provisions	1,938	0.7%	752	0.4%
Net Spread (before tax)	6,040	2%	6,849	3.5%

e) Opportunities & Threats

The overall economic recovery presents a notable chance to capitalize on the growth experienced by the Company in FY25. We believe that demand for two-wheelers is poised to increase shortly, thus making way for financing companies. With diversified new products, the Company aims to build on its existing customer base while taking advantage of its MUTHOOT PAPPACHAN or MUTHOOT BLUE brand and dealer relationships. RBIs outlook of keeping an accommodative stance with regards to economic stimulation is likely to have a positive result on NBFCsgrowth prospects. There is immense potential for market expansion as NBFCs are often seen as single-stop financiers provided they have sufficient funds.

Nevertheless, there are a few risks including weaker financial status, tighter regulation due to incidents of mismanagement and liquidity crisis at certain times which can hinder their progress. Moreover, Banks and other NBFCs offer stiff competition tothis industry with diminishing entry barriers offering customers more options. Nevertheless, the Company manages to differentiate itself through customer services, digitization, and product features and strives to maintain this throughout.

RISKS & CONCERNS

a) Credit Risk:

Credit risk is basically the risk of loss due to the failure of a borrower/counterpart to meet the contractual obligation of repaying his debt. The risk could be on account of some erroneous sourcing done by the Company or because the customer might be facing some issues which do not permit him to make the repayment even if he wanted to.

Measures:

Before sanctioning loans, the Company performs a thorough background check of the potential customers to avoid any chances of fraud and default. The checks include field investigation, credit checks and tele-verification. Implementation of multistep Customer verification, Hygiene Dashboard, Early Warning System, PD-LGD Models, Portfolio management etc. can be measures to mitigate credit risk.

b) Operational Risk:

Operational risks are those which arise as a result of incompetent or failed internal processes, people and systems or from external events.

Measures:

The constant skill development and training programs form the core of the employees training programmes. In line with the Companys objective to automate the processes thereby minimizing errors and strengthening the due-diligence mechanisms, the Company undertake digitalization initiatives at par with best of industry standards. The Company have CRMC, ORMC, OVRMC, PPAC Committees to have check on policies and to correct loopholes. Document Movement, Storage and Retrieval, Non-Compliance Reporting Policy, Internal audits, Technology Infrastructure etc. are other measures to control operational risk.

c) Compliance Risk:

Risk potential on account of changes in laws, regulations or interpretations that cause business losses. Measures:

Compliance Risk mitigation is the process of developing and implementing controls such as standards, policies, procedures and guidelines to prevent or minimize compliance risks. The Companys operations would be affected by any changes in the regulatory environment. The process of mitigation includes Circulation of compliance checklist, Audit Committee and Board reviews on status of compliance, proactively monitoring and identifying new and changes in relevant laws, regulations, circulars, notifications, etc. reviewing of compliance policies, resolution of conflicts between policies and statutory enactments and/or regulations from time to time.

d) Reputation Risk:

Reputation Risk is the risk to earnings and capital arising from adverse perception of the image of the Company, on the part of customers, counterparties, shareholders, investors and regulators.

Measures:

Strict adherence to the Fair Practice Code, a well-defined Grievance Redressal Mechanism, good customer connects, and delinquency Management helps to mitigate the reputational risk.

e) Strategic Risk:

Strategic Risk is the risk to earnings and capital arising from lack of responsiveness to changes in the business environment and /or adverse business decisions, besides adoption of wrong strategies and choices.

Measures:

Major factors which cover in monitoring strategic risk are the changes in its competitive environment, Regulatory environment, Technology changes, Product profiling, Business planning and Strategic Planning. The factors mentioned above include how well the Company is adapting to new technology, pace of product diversification, pace of adapting to regulatory changes, resilience to competitors changes, smooth budget allocation, governance, and involvement of the Board.

f) Liquidity Risk:

Liquidity Risk arises largely due to maturity mismatch associated with assets and liabilities of the Company. Liquidity risk stems from the inability of the Company to fund increase in assets, manage unplanned changes in funding sources and meet financial commitments when required.

Measures:

A well-defined contingency funding plan, maintaining a portfolio of high-quality liquid assets, employing rigorous cash flow forecasting and ensuring diversified funding sources to mitigate liquidity risk

g) Capital and Leverage Risk

A high degree of leverage can severely impact the liquidity profile of the Company and lead to default in meeting its liabilities. Compliance of covenants of lenders and any operational delays in repayment of loans may have an impact in the liquidity of the Company.

Measures:

Strict adherence to sanction terms, prompt repayment of loans and monitoring of leverage ratio regularly mitigate the chances of capital and leverage risk.

h) Information Technology Risk:

IT risks include hardware and software failure, human error, spam, viruses and malicious attacks as well as natural disasters such as fires, cyclones or floods.

Measures:

A comprehensive risk assessment of IT systems is done on a semi-annual basis. The assessment make an analysis of the threats and vulnerabilities to the information technology assets and their existing security controls and processes. The outcome of the exercise are done to find out the risks present and to determine the appropriate level of controls necessary for appropriate mitigation of risks. To counter the risks related to information technology, the Company is contemplating a major revamp of its technology platform. Various IT policies are adhered to.

i) Securitization and Off-Balance sheet Risk

Securitization represents an alternative and diversified source of finance based on the transfer of credit risk (and possibly also interest rate and currency risk) from issuers to investors. Off-balance sheet Risk is a risk related to the excessive growth rate in contingencies.

Measures:

Thorough monitoring of Securitization and Off-balance sheet portfolio can mitigate the Securitization and Off-Balance sheet Riskto an extent possible.

j) Other Risks

Climate change risk, Political risk, Environment, Social and Governance Risk, Vendor Management Risk etc. are few other risks which affect a financial institution.

Measures:

Various risk assessments and stress testing forecast the effect that may occur during such adverse conditions, hence proper planning and implementation mitigate such risks to an extent.

CORPORATE GOVERNANCE

The Company upholds the highest standards of corporate governance, ensuring transparency, accountability and ethical conduct across all levels. As a responsible Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India (RBI), the Company has adopted robust governance practices that go beyond statutory compliance and reflect a deep commitment to transparency, accountability, fairness and ethical conduct.

The Board of Directors of the Company, comprising a balanced mix of executive and independent members, provides strategic oversight and ensures effective governance through well-structured committees such as the Audit Committee, Risk Management Committee, Nomination and Remuneration Committee and others. In compliance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Reserve Bank of Indias Scale Based Regulations framework, the Company has adopted robust policies, internal controls and periodic board evaluations. A strong ethical framework is maintained through the Code of Conduct and Whistle Blower Policy.

Corporate Governance at the Company is not limited to regulatory adherence but is embedded in its culture, supporting sustainable growth and stakeholder trust.

INVESTMENT PROPOSITION

The organization is heading towards long-term sustainability prioritizing customer satisfaction and value addition for the stakeholders. Given the unhindered availability of inputs, the two-wheeler segment appears to be poised significant growth, despite an abysmally low performance this year.

The southern states still appears to possess enough space for market penetration. The Company is planning strategies to expand its presence across the country in a robust manner. The Groups Flagship Company, Muthoot Fincorpwith its expanding infrastructure, is expected to lead to lower entry costs for the Company in new locations. The large network of branches of Muthoot Fincorp will aid in expanding rapidly with minimal operational costs. Ultimately, the decision will reap multiple benefits in medium to long-term basis.

The used four-wheeler segment is very different from the two-wheeler. In the used four-wheeler segment, the Company has been in operation in 20 centers and looks forward to increasing its penetration along with the 2W segment. With proper channels, better distribution networks and efficient tea ms in place, this segment would lead to higher growth and profitability in the longer term. Our digital technology and analytics would ensure quicker processing of accurate data to confirm the correctness in the sourcing and speedy completion of disbursement. This would ensure that the operational costs would be kept minimal.

The Company has diverse options for funding purposes and the confidence of the investors / lenders remains untethered. We are eagerto build new partnerships with the lenders and preserve their trust under all circumstances. Raising funds at reasonable rates will not be a challenge, thanks to the Governments stimulus packages and RBI initiatives. The skilled workforce and proper sourcing and collection infrastructure will only improve our chances of growth and make our goals achievable.

INTERNAL CONTROL SYSTEMS & ADEQUACY

Secure and effective internal control helps in eliminating the risk of asset loss, protecting sensitive information, verifying the accuracy of important data within the stipulated time and conducting operations in a legal manner.

The Company has an in-house internal audit team which collaborates with an outsourced reputed audit firm to bring specialized expertise to the audit evaluation. The former handles verification of all financial transactions/operations/security on a constant basis while ensuring accuracy of data and compliance with the regulations. Any deviations in these tasks are relayed directly to the Management. In addition to this, regular transactions are verified by a concurrent audit team which is a separate in-house team actively works with the finance department.

Currently in-house internal audit team supported by reputed internal auditors, M/s. BDO India LLP, a popular and dignified firm of Chartered Accountant professionals. The Internal Auditors monitor the systems and business operations of the Company. Any weaknesses in the system, non-compliance with the regulations and any suggestions for improved performance are reported by the Internal Auditors.

Statutory auditors reviewthe Internal Audit Report while conducting audit functions to verify that there are no transactions which fall outofthe regulatory stipulations, and which are againstthe interests ofthe Company. The Audit Committee reviews the Internal Audit Report and the quarterly Compliance Report and they also ensure thatthe observations in the report were addressed within the righttime and manner by the Management.

The in-house internal audit team is solely responsible for ensuring that overall internal controls are in place and adequately working. In-house team consolidates all open audit points and tracks with stakeholders till completion. The Audit Committee also reviews an Action Taken Report (ATR) which lists the points requiring correction and the relevant action needed.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCE

The PEOPLE & CULTURE division ofthe Company is one of its most important assets as it is crucial in developing, reinforcing and changing the culture of an organization. For better business success and enhanced workforce management, HR plays a vital role. With proven professionals spearheading the growth ofthe HR department in our Company, the employees are aligned with the Companys goals and objectives.

The Company understands that the efficiency of its employees will directly lead to the profitability ofthe organization. There is an increase in the workforce from 1,995 employees in 2024to 2,318 employees in 2025. The Company have successfully maintained a low-cost strategy for manpower and enabled professional partnerships on a variable cost basis.

The Company had organized skill upgradation training programs aimed at up-skilling the employees to help utilize their potential in the best possible manner. Since all these factors contribute heavily to productivity, the Company ensures that the enthusiasm levels ofthe employees are high in all the offices. Continuing the automations in HR Process, this year we have automated Payroll, F&F, Performance Management System.

The Company offers salaries and incentives which are of industry standards to appropriately reward the efforts ofthe employees, helpthem form a shining career and continue retaining talent. We strive to create growth opportunities for the employees and recognize their achievements.

EMPLOYEE ENGAGEMENT

The Company continues to maintain its commitment towards ensuring a motivating and uplifting environment which ensures the focus and engagement of its workforce. To boost the morale of the employees, we consistently take initiatives which help in developing skills and promote team building. It is proven that motivated employees perform exceedingly well and feel valued as a part of the Company. We are dedicated to continue our efforts in the direction of making the Company a desirable working organization where everyone is pushed towards excellence and appreciated for their efforts.

As a testimony of the efforts, MCSL got certified as Great Place to Work in the month of October, 2024, with overall Trust Index Score - 82%. With 70% of our employees participating in the survey, this prestigious recognition is a reflection of our continued commitment to create a workplace that supports every individual to do their best work.

CAUTIONARY STATEMENT

The statements made in this report describes the Companys objectives and projections which may be forward looking statements within the meaning of applicable laws and regulations and should be read in conjunction with the financial statements included herein and the notes thereto. Important developments that could affect the Companys operations include a downtrend in the industry - global or domestic or both, significant changes in the political and economic environment in India or abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other factors. The actual result might differ materially from those expressed or implied. The Company is not under any obligation to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments, information or events.