Muthoot Microfin Ltd Management Discussions

MUTHOOT PAPPACHAN GROUP

The Muthoot Pappachan Group (‘MPG, or ‘the Group), widely known as ‘Muthoot Blue, was founded in 1887 by Ninan Mathai. Since its inception, the Group has built a legacy of trust, customer satisfaction, and steady growth. Over the years, MPG has evolved into a diversified conglomerate with a presence across financial services, automotive, hospitality, real estate, information technology infrastructure, precious metals, and alternate energy sectors. With a strong foundation in its core values, the Group continues to deliver innovative solutions, explore new use cases, and enhance customer experience across businesses.

Target Customer Segments

MPGs strategic focus remains on the underserved, lower-income segments, ensuring access to relevant and affordable financial solutions.

Position of Muthoot Microfin Limited within MPG

Muthoot Microfin Limited (‘MML, or ‘the Company) stands as the second-largest entity within the MPG ecosystem. It benefits from the Groups strong brand recall, marketing strength, and operational support, which enhance its market presence. Moreover, MML plays a critical role in empowering women entrepreneurs, particularly those from economically weaker backgrounds, by providing access to entry-level financial solutions.

Leveraging Group Synergies

Integrated Access to Financial Services

Through MPGs platform, MML gains access to the Groups comprehensive range of loan offerings, enabling cross-selling of financial products and better alignment with customer needs.

Operational Capabilities and Efficiency

Building on the Groups expertise in branch network expansion, cash management systems, and gold loan operations under

Muthoot Fincorp Limited (MFL), the Company continues to improve its operational effectiveness.

Strong Rural Presence

MPGs deep penetration in rural markets enables MML to serve women customers with tailored, need-based financial solutions.

Brand Strength and Customer Trust

The Groups credibility strengthens MMLs ability to build trust, expand its customer base, and grow its geographic footprint.

Backed by the strength of the Groups network, MML is well-positioned to scale sustainably while deepening its impact on financial inclusion. The Groups integrated capabilities continue to reinforce MMLs role as a key growth engine within MPG.

Company Overview

Muthoot Microfin Limited, the microfinance arm of the Muthoot Pappachan Group, has established itself as the second-largest NBFC-MFI in India, with a strong focus on empowering women and driving inclusive growth. Leveraging the Groups legacy and brand strength, MML has significantly enhanced its market presence, operational capabilities, and brand recall. This integrated approach enables the Company to scale rapidly and sustainably.

MML operates on a Joint Liability Group (JLG) model, serving women from low-income households across rural and semi-urban India. Through income-generating loans, the Company enables access to formal credit, supporting women engaged in micro and small enterprises in strengthening their livelihoods and fostering financial independence. In line with evolving customer needs, it has also advanced its diversification strategy by expanding into Individual Loans, Micro Loan Against Property (LAP), and Gold Loans. This expansion supports building a more balanced and resilient portfolio while deepening customer relationships.

Technology remains a key enabler of MMLs growth. The Company has invested in in-house digital platforms and developed a proprietary credit scorecard based on internal data and behavioural insights, complemented by bureau data from Equifax. This system is supported by a multi-layered underwriting and risk-monitoring framework that strengthens credit assessment, enhances risk management, and enables scalable, responsible growth.

IMPACT OF NON-BANKING FINANCIAL COMPANIES AND MICROFINANCE INSTITUTIONS (NBFC-MFI) SECTORS PERFORMANCE ON MML

Indias microfinance sector plays a vital role in advancing financial inclusion by providing underserved households with access to formal credit and supporting women-led entrepreneurship in rural and semi-urban regions. Beyond credit delivery, the sector strengthens livelihoods, promotes micro-enterprises, and builds financial resilience among low-income communities, thereby contributing meaningfully to inclusive socio-economic development.

2025-26 marked a transition phase for the NBFC-MFI industry, as the sector recalibrated after a period of rapid credit expansion in earlier years. During the year, the focus shifted towards portfolio consolidation, tighter underwriting standards, and more responsible lending practices, reflecting the industrys effort to strengthen asset quality and ensure sustainable long-term growth. This recalibration was shaped by evolving state-level regulatory developments, the introduction of guardrails around lending practices, and a heightened emphasis on borrower protection and responsible lending. Collectively, these measures have helped build a more disciplined, resilient, and transparent microfinance ecosystem. As of December 31, 2025, the microfinance industrys total loan portfolio stood at approximately _3,14,728 crores, including a DPD 180+ portfolio of _53,551 crores.

NBFC-MFIs remained the largest providers of micro-credit, with an outstanding portfolio of _1,32,418 crores, accounting for 42.1% of the industry total. Banks held a 26.7% share, followed by Small Finance Banks at 17.5%, NBFCs at 12.5%, and other MFIs at 1.2%.

Among states, the top 10 states account for 83% of the Gross Loan Portfolio, with Bihar, Tamil Nadu, and Uttar Pradesh emerging as the largest contributors in terms of outstanding portfolio.

During the year, the regulatory and policy environment supported the microfinance sector, with two key developments standing out. The reduction in the qualifying asset criteria for NBFC-MFIs from 75% to 60% by the Reserve Bank of India introduced greater flexibility in portfolio composition. This enables institutions to diversify their asset base beyond traditional microfinance lending while maintaining their core focus on financial inclusion. The change is expected to support a more balanced growth, improve risk distribution, and enhance operational resilience across the sector. In parallel, the Union Budget 2026–27 reinforced the governments continued emphasis on credit-linked livelihoods and allied agricultural activities. This focus is expected to promote income diversification in rural areas, strengthen borrower cash flows, and improve repayment capacity over time. Together, these measures have strengthened the sectors ecosystem, enabling responsible expansion and supporting sustainable and inclusive growth.

Key Challenges Faced by the Sector in 2025–26

Despite the stabilisation trends, the industry faced a set of structural challenges during the year:

• The industry continued to deal with residual stress from the 2024–25 credit cycle, particularly due to overleveraging in select borrower segments, which led to a more cautious and selective lending approach during the year

• Regional regulatory developments in states such as Karnataka, Tamil Nadu, and Bihar resulted in heightened scrutiny and more conservative lending practices, thereby moderating disbursement activity in certain pockets

• Adverse weather conditions, including torrential rainfall and heatwaves in select regions, impacted borrower income stability and disrupted repayment patterns in affected geographies

• Certain geographies experienced temporary stress in asset quality, necessitating stronger field-level monitoring, closer borrower engagement, and intensified collection efforts to stabilise portfolios

• The implementation of tighter underwriting norms and stricter affordability assessments led to a slowdown in credit offtake, particularly in regions with higher borrower leverage concerns

• The sector also witnessed higher operating costs, driven by increased investments in on-ground monitoring, recovery infrastructure, and compliance-related requirements

Performance of MML

The year for MML marked a phase of stabilisation, disciplined execution, and strengthening of internal processes and systems. In line with the evolving sector environment, the Company prioritised portfolio quality, strong risk governance, and sustainable growth over volume-led expansion. Reflecting this calibrated approach, Assets Under Management grew by 13.34%, as the Company focused on reinforcing its core credit and collection frameworks.

MML placed strong emphasis on underwriting discipline and recovery effectiveness, with dedicated collections teams focusing on stressed and high DPD accounts. This proactive approach helped maintain portfolio stability even in a cautious credit environment and contributed to a 1828 bps reduction in credit cost, reaching 2.8%. To further strengthen the risk management framework, the Company enhanced its data-led underwriting capabilities through a proprietary in-house credit scorecard. Built on internal behavioural insights and repayment patterns, and supplemented by bureau data, this scorecard enables finer risk segmentation, sharper credit decisions, and better alignment with portfolio strategy.

Technology and digitalisation continued to play a central role in transforming MMLs operations and customer engagement. The Muthoot Mahila Mitra App witnessed strong traction, with over 2.02 million cumulative downloads, reflecting increasing digital adoption among its customer base. The Company further strengthened its position in digital collections, with approximately 33.9% of Q42025-26 collections routed through bank accounts and digital channels, improving efficiency and reducing operational friction.

In addition, MML deployed GenAI-based solutions to further enhance its underwriting processes. Customer interactions during field visits are now recorded in vernacular languages and automatically converted into English text, generating standardised, structured credit appraisal memos. This has improved both consistency and turnaround time in credit evaluation.

Collectively, these initiatives have strengthened operational efficiency, risk management capabilities, and the customer experience, positioning the Company well for sustainable growth.

Other initiatives include:

• Deployment of AI-led Early Warning Systems (EWS) for proactive risk identification

• Integration of AI in underwriting workflows for consistency and structured evaluation

• Usage of geo-tagging, Aadhaar-based eKYC, and real-time bureau checks for stronger verification

• Implementation of an end-to-end digital loan management system, improving efficiency and turnaround times

• Intr oduction of Suvidha, an app-based digital loan product, to promote digital literacy, convenience, and greater financial control for women customers These interventions collectively strengthened risk visibility, operational speed, and governance quality.

Portfolio Diversification and Business Mix Evolution

In line with evolving customer needs and broader sector trends, MML continued to strengthen its portfolio diversification strategy during 2025–26. While the Joint Liability Group (JLG) model remains the cornerstone of the Companys business, it has also progressively expanded its presence in Individual Loans, Micro Loan Against Property (LAP), and Gold Loans. This strategic shift reflects the Companys intent to build a more balanced and risk-diversified lending portfolio, while also enhancing the ability to serve customers across different stages of their credit lifecycle. The approach aligns with the industrys gradual movement towards combining group-based lending with individual and secured lending products, thereby improving overall portfolio resilience.

During the year, the Company saw a growing contribution from high-quality individual-borrower segments, particularly customers with strong credit profiles. This shift has deepened customer relationships, improved portfolio stability, asset quality, and fostered a more sustainable growth trajectory.

Financial Performance

Particulars	As of/for the year ended March 31, 2026	As of/for the year ended March 31, 2025
Gross Loan Portfolio ( million)	1,40,056.22	1,23,567.18
Period on period growth in gross loan portfolio (%)	13.34%	1.34%
Disbursements ( million)	94,184	88,725
Period on period growth in disbursements (%)	6.15%	(16.78%)
Number of loans disbursed (million)	1.17	1.81
Customers to whom loans were disbursed during the period (million)	1.10	1.38
New customers (million)	0.36	0.56
Active customers (million)	3.27	3.43
Customers with Mahila Mitra app downloads (million)	2.02	1.79
Customers who transacted digitally with us (million)	1.80	2.24
Overall digital collection ( million)	22,659.63	22,965.97
Revenue from operations ( million)	23,695.68	25,616.93
Net Interest Income (NII) ( million)	14,154.91	15,511.51
Net Interest Margin (NIM)	11.88%	12.36%
Ratio of operating expenses to monthly average gross loan portfolio	6.70%	6.21%
Ratio of provisions and write offs to monthly average gross loan portfolio	3.51%	9.36%
Pre-provision operating profit before tax ( million)	6,555.79	8,676.37
Profit After Tax (PAT) ( million)	1,702.67	(2,225.23)
Total comprehensive income for the year ( million)	2,136.07	(1,805.85)
Debt to Equity (DE) (times)	3.34	3.01
Return on Assets (RoA)	1.34%	(1.80%)
Return on Equity (RoE)	6.21%	(8.19%)
Net Worth	28,543.12	26,322.27
Cost to Income Ratio (CIR) (%)	56.48%	46.92%
Average annual cost of borrowings (%)	10.27%	11.02%
Impairment allowance coverage ratio (%)	71.53%	73.32%
Capital to Risk Assets Ratio (CRAR) (%)	23.92%	27.85%
Insurance premium collected ( million)	5,356.23	4,331.05
Life insurance ( million)	4,076.29	2,835.56
Medical insurance ( million)	847.29	1,036.25
Natural calamity insurance ( million)	432.64	459.25

KEY COMPONENTS OF MMLS PROFIT AND LOSS STATEMENT

The description of the key components of our profit and loss statement is mentioned below.

Income

Revenue from Operations

Revenue from operations comprises interest income, fees and commission income, net gain on fair value changes, income on investments and sale of services. Interest income includes interest on loan portfolio (measured at amortised cost), interest on deposits from banks and interest on loan assets (measured at fair value through other comprehensive income). Fees and commission income is comprised of facilitation fees that the Company earns from manufacturers and distributors which sell their products to customers at the Companys branches and the commission earned through insurance intermediation. Net gain on fair value changes consists of net gain on the sale of loan assets recognised through its profit and loss account. It relates to the fair value changes of the Companys loan assets that it assigns pursuant to its assignment transactions. Income from investments is the income earned from investments in government securities and mutual funds. Sale of services includes the income which the Company receives in relation to collection services that it provides for the portion of loans assigned.

Other Income

Other income comprises interest income on security deposits, gain on termination or modification of lease, interest on income tax refund and miscellaneous income.

Expenses

Expenses include finance costs, fees and commission expenses, net loss on derecognition of financial instruments under amortised cost category, impairment on financial instruments, employee benefit expenses, depreciation and amortisation expense and other expenses.

Finance Cost

Finance costs comprise interest on borrowings (other than debt securities), interest on debt securities and interest cost on lease liabilities.

Fees and Commission Expenses

Fees and commission expenses comprise fees and commission expenses, which relate to expenses incurred in outsourcing the cash management operations to MFL and third-party cash management agencies.

Net Loss on Derecognition of Financial Instruments under Amortised Cost Category

Net loss on derecognition of financial instrument under amortised cost category is the difference between the net carrying value of the loan assets sold to Asset Reconstruction Company and the purchase consideration received for the same.

Impairment on Financial Instruments

Impairment on financial instruments comprises write-off of loans and other receivables, waiver of credit impaired loans as a result of settlements entered with its delinquent customers, financial guarantee expenses and provision for impairment on loan assets and other receivables and netted off with the bad debts recovered.

Employee Benefit Expenses

Employee benefit expenses include salaries and wages, contributions to provident and other funds, share-based payments, gratuity, compensated absence and staff welfare expenses.

Depreciation and Amortisation Expenses

Depreciation and amortisation expense includes depreciation on property, plant and equipment, depreciation on right-of-use assets and amortisation.

Tax Expenses

The tax expenses are comprised of current tax, deferred tax and tax associated to prior periods.

Results of Operations for Financial Year 2025–2026 and 2024–2025

		Financial year
Particulars	2025-26		2024-25
	( in million)	% of total income	( Rs. _in million)	% of total income
Income
Revenue from operations	23,695.68	99.53%	25,616.93	99.89%
Other income	111.29	0.47%	28.79	0.11%
Total income	23,806.97	100.00%	25,645.72	100.00%
Expenses
Finance costs	8,744.64	36.73%	9,301.05	36.27%
Fees and commission expenses	220.14	0.92%	253.62	0.99%
Net loss on derecognition of	73.59	0.31%	1,142.17	4.45%
financial instruments under
amortised cost category
Impairment on financial instruments	4,393.10	18.45%	10,423.24	40.64%
Employee benefit expenses	6,035.10	25.35%	5,339.07	20.82%
Depreciation and amortisation	431.34	1.81%	428.37	1.67%
expense
Other expenses	1,819.96	7.64%	1,647.24	6.42%
Total expenses	21,717.87	91.22%	28,534.76	111.27%

 

		Financial year
Particulars	2025-26		2024-25
	( in million)	% of total income	( Rs. _in million)	% of total income
Profit before tax	2,089.10	8.78%	(2,889.04)	(11.27%)
Tax expenses	386.43	1.62%	(663.81)	(2.59%)
Current tax	148.48	0.62%	468.41	1.83%
Deferred tax	311.58	1.31%	(1,100.71)	(4.29%)
Tax relating to prior years	(73.63)	(0.31%)	(31.51)	(0.12%)
Profit for the year	1,702.67	7.15%	(2,225.23)	(8.68%)

2025-26 COMPARED TO 2024-25 Income Revenue From Operations

Our revenue from operations reduced by 7.50% to Rs. 23,695.68 million for the 2025-26 from Rs. 25,616.93 million for the 2024-25, primarily due to decrease in interest income to Rs. 21,389.77 million for the 2025-26 from Rs. 23,694.79 million for the 2024-25, which was primarily attributable to decrease in interest on loan portfolio to Rs. 21,077.02 million for the 2025-26 from

23,311.23 million for the 2024-25. The decrease in interest on loan portfolio was in line with decreases in active customers to 3.27 million as of March 31, 2026, from 3.43 million as of March 31, 2025. The decrease in revenue from operations was also due to a decrease in fees and commission income to Rs. 948.72 million for the 2025-26 from Rs. 973.04 million for the 2024-25, primarily as there was no facilitation and branding fees income in 2025-26, compared to Rs. 910.31 million for the 2024-25, which was offset against the increase in insurance commission income from Rs. 170.67 million for the 2024-25 to Rs. 647.47 million for the 2025-26. Revenue from operations were also impacted positively by the increase in the net gain on fair value changes to Rs. 1,133.33 million for 2025-26 from Rs. 695.26 million for 2024-25.

Other Income

Other income increased by 286.57% to Rs. 111.29 million for the 2025-26 from Rs. 28.79 million for the 2024-25. The increase was primarily due to increase in interest on income tax refund to Rs. 49.50 million for the 2025-26 from Rs. 7.71 million for the 2024-25, Gain on termination/modification of lease to Rs. 35.54 million for the 2025-26 from Rs. 5.94 million for the 2024-25, and miscellaneous income to Rs. 20.89 million for the 2025-26 from

10.35 million for the Financial Year 2025.

Expenses Finance Cost

Finance costs decreased by 5.98% to Rs. 8,744.64 million for the 2025-26 from Rs. 9,301.05 million for the 2024-25, primarily due to decreases in (i) interest on borrowings

(other than debt securities) to Rs. 7,929.82 million for the 2025-26 from Rs. 8,208.93 million for the 2024-25, and (ii) interest on debt securities to Rs. 631.53 million for the 2025-26 from

906.45 million for the 2024-25, primarily due to sourcing of funds at a lower rate and (iii) interest cost on lease liabilities to Rs. 183.29 for the 2025-26 from Rs. 185.67 million for the 2024-25, primarily attributable to a decrease in number of lease contracts that we entered into, as there was no increase in branches from March 31, 2025.

Fees And Commission Expenses

Fees and commission expenses decreased by 13.20% to

220.14 million for the 2025-26 from Rs. 253.62 million for the 2024-25.

Net loss on derecognition of financial instruments under amortised cost category.

Net loss on derecognition of financial instruments reduced by 93.56% to Rs. 73.59 million in 2025-26, from Rs. 1,142.17 million for the 2024-25, as the ARC pool for current year was had a higher provision coverage.

Impairment On Financial Instruments

Impairment on financial instruments decreased by 57.85% to

4,393.10 million for the 2025-26 from Rs. 10,423.24 million for the 2024-25, primarily due to decrease in (i) provision for impairment on loan assets to Rs. 1,009.72 million for the 2025-26 from Rs. 6,204.86 million for the 2024-25, as there was improvement in Non-Performing Assets to Rs. 4,209.21 million for the 2025-26 from Rs. 4,511.67 million for the 2024-25 and reversal of management overlay of Rs. 2,296.53 million, which was created in 2024-25, (ii) loans waived off to Rs. 354.85 million for the 2025-26 from Rs. 924.35 million for the 2024-25, (iii) loans written off to Rs. 3,081.16 million for the 2025-26 from

3,180.94 million for the 2024-25.

Employee Benefits Expenses

Employee benefits expense increased by 13.04% to Rs. 6,035.10 million for the 2025-26 from Rs. 5,339.07 million for the 2024-25, primarily due to increases in (i) salaries and wages to Rs. 5,380.36 million for the 2025-26 from Rs. 4,735.15 million for the 2024-25, and (ii) contribution to provident and other funds to Rs. 423.36 million for the 2025-26 from Rs. 396.33 million for the 2024-25, as a result of annual increase in salaries and bonuses of our employees. Further, the increase in employee benefits expense was also attributable to an increase in staff welfare expenses to Rs. 119.69 million for the 2025-26 from

91.03 million for the 2024-25, and gratuity and compensated absence to Rs. 83.24 million for the 2025-26 from Rs. 63.64 million for the 2024-25.

Depreciation and Amortisation Expense

Depreciation and amortisation costs increased by 0.69% to

431.34 million for the 2025-26 from Rs. 428.37 million for the 2024-25, due to increases in depreciation on right-of-use assets to Rs. 266.19 million for the 2025-26 from Rs. 254.86 million for the 2024-25, which was offset with the reduction in depreciation on property, plant and equipment to Rs. 164.26 million for the 2025-26 from Rs. 172.87 million for the 2024-25.

Other Expenses

Other expenses increased by 10.49% to Rs. 1,819.96 million for the 2025-26 from Rs. 1,647.24 million for the 2024-25, primarily due to an increase in expenses relating to (i) legal and professional charges to Rs. 385.97 million for the 2025-26 from

342.09 million for the 2024-25, (ii) traveling and conveyance to Rs. 634.04 million for the 2025-26 from Rs. 568.87 million for the 2024-25, (iii) software support charges to Rs. 220.78 million for the 2025-26 from Rs. 139.09 million for the 2024-25, and (iv) officer expense to Rs. 79.90 million for the 2025-26 from Rs. 63.47 million for the 2024-25.

Profit Before Tax

As a result of the foregoing, the Company earned a profit of

2,089.10 million for the 2025-26, compared to loss of

2,889.04 million for the 2024-25.

Tax Expense

Current tax reduced by 68.30% to Rs. 148.48 million for the 2025-26 from Rs. 468.41 million for the 2024-25, primarily due to a reduction in taxable income to Rs. 956.61 million for the 2025-26 from Rs. 2,202.40 million for the 2024-25.

As a result of timing differences in making provisions for loan assets, gratuity and leave encashment and Ind AS adjustments, we had a deferred tax charge of Rs. 311.58 million in 2025-26, against deferred tax reversal of Rs. 1,100.71 million in 2024-25. As a result of excess provision created for tax in 2024-25, we had tax reversal relating to prior years of Rs. 73.63 million as of March 31, 2026.

Profit after Tax

As a result of the foregoing, our profit after tax came to

1,702.67 million for the 2025-26 against loss of Rs. 2,225.23 million for the 2024-25.

FINANCIAL POSITION

Our net worth increased by 8.44% to Rs. 28,543.12 million as of March 31, 2026, from Rs. 26,322.27 million as of March 31, 2025. The increase in net worth is mainly due to the after-tax profit of the Company, amounting to Rs. 1,702.67 and other comprehensive income amounting to Rs. 433.40.

The following table sets forth our selected financial data from our financial statements as of March 31, 2026 and 2025:

	As of March 31,	As of March 31,
Particulars	2026 (_in million)	2025 (_in million)
Assets:
Total financial assets	1,23,806.70	1,04,411.24
Total non-financial assets	3,041.35	4,158.97
Total assets	1,26,848.05	1,08,570.21
Liabilities and equity:
Total financial liabilities	98,043.70	82,044.93
Total non-financial liabilities	261.23	203.01
Total liabilities	98,304.93	82,247.94
Total equity	28,543.12	26,322.27
Total liabilities and equity	1,26,848.05	1,08,570.21

Assets

We had total assets of Rs. 1,26,848.05 million as of March 31, 2026, compared to Rs. 1,08,570.21 million as of March 31, 2025. The increase in total assets was due to increase in financial assets.

Financial Assets

Our total financial assets increased by 18.58% to Rs. 1,23,806.70 million as of March 31, 2026, from Rs. 1,04,411.24 million as of March 31, 2025, primarily due to increase in (i) loan assets to

1,03,964.70 million as of March 31, 2026 from Rs. 87,401.91 million as of March 31, 2025, in line with increase in disbursements, and (ii) derivative financial instruments (assets) to Rs. 1,826.45 million as of March 31, 2026 from Rs. 76.86 million liability as of March 31, 2025.

Non-Financial Assets

Our total non-financial assets decreased by 26.87% to

3,041.35 million as of March 31, 2026 from Rs. 4,158.97 million as of March 31, 2025 primarily due to decrease in (i) deferred tax assets (net) to Rs. 480.84 million as of March 31, 2026 from Rs. 938.19 million as of March 31, 2025, (ii) current tax assets (net) to Rs. 355.60 million as of March 31, 2026 from

802.06 million as of March 31, 2025, (iii) right-of-use assets to Rs. 1,295.08 million as of March 31, 2026 from Rs. 1,456.84 million as of March 31, 2025, and (iv) property, plant and equipment to Rs. 693.13 million as of March 31, 2026 from

767.73 million as of March 31, 2025, which were primarily attributable to the improvement in financial performance of the Company.

Liabilities

We had total liabilities of Rs. 98,304.93 million as of March 31, 2026, compared to Rs. 82,247.94 million as of March 31, 2025. The increase in total liabilities was mainly due to increase in financial liabilities.

Financial Liabilities

Our total financial liabilities increased by 19.50% to

98,043.70 million as of March 31, 2026 from Rs. 82,044.93 million as of March 31, 2025, primarily due to increase in (i) debt securities to Rs. 10,426.10 million as of March 31, 2026 from Rs. 5,636.63 million as of March 31, 2025, (ii) borrowings (other than debt securities) to Rs. 85,046.85 million as of March 31, 2026 from Rs. 73,627.58 million as of March 31, 2025, primarily due to fresh issue of non-convertible debentures and new borrowings from banks and financial institutions through term loans, securitisation arrangement and external commercial borrowing.

Non-Financial Liabilities

Our total non-financial liabilities increased by 28.68% to

261.23 million as of March 31, 2026 from Rs. 203.01 million as of March 31, 2025, primarily due to increase in provisions to

157.83 million as of March 31, 2026 from Rs. 111.76 million as of March 31, 2025, and increase in other non-financial liabilities to Rs. 103.40 million as of March 31, 2026 from Rs. 91.25 million as of March 31, 2025.

Equity

Our total equity increased by 8.44% to Rs. 28,543.12 million as of March 31, 2026 from Rs. 26,322.27 million as of March 31, 2025 primarily due to increase in other equity to Rs. 26,865.45 million as of March 31, 2026 from Rs. 24,646.30 million as of March 31, 2025, primarily attributable to increase in (a) retained earnings to Rs. 6,079.85 million as of March 31, 2026 from Rs. 4,728.77 million as of March 31, 2025, due to the profit earned during the year.

LIQUIDITY AND CAPITAL RESOURCES Liquidity

As of March 31, 2026, we had cash available for use in our operations of Rs. 7,011.48 million. We currently invest our surplus cash in fixed deposits with various banks and debt mutual funds. We regularly monitor our funding levels to ensure we have sufficient liquidity to discharge our liabilities. We maintain diverse sources of funding and liquid assets to facilitate flexibility in meeting our liquidity requirements. Liquidity is provided principally by short-term and long-term borrowings from banks and other financial institutions, recovery on our loan portfolio, proceeds from securitisation and assignment of loans, issue of debentures, sales of equity securities and retained earnings.

Particulars	2025-26	2024-25
Net cash (used in)/generated from operating activities	(5,803.26)	13,820.28
Net cash (used in)/generated from investing activities	(413.93)	(1,277.86)
Net cash (used in)/generated from financing activities	6,256.16	(14,846.41)
Net (decrease)/increase in cash and cash equivalents	38.98	(2,303.99)

Operating Activities

Net cash used in operating activities was Rs. 5,803.26 million for the 2025-26. We had profit before tax of Rs. 2,089.10 million, which was primarily adjusted for impairment on financial instruments of Rs. 4,393.10 million, finance cost on borrowings of Rs. 8,561.35 million, depreciation and amortisation of

431.34 million. This was offset by the increase in loan assets of Rs. 21,094.13 million.

Net cash generated from operating activities was Rs. 13,820.28 million for the 2024-25. We had loss before tax of Rs. 2,889.04 million, which was primarily adjusted for impairment on financial instruments of Rs. 10,423.24 million, net loss on derecognition of financial instruments under amortised cost category of

1,142.17 million, finance cost on borrowings of Rs. 9,115.38 million, depreciation and amortisation of Rs. 428.37 million, working capital changes such as decrease in other receivables of Rs. 1,919.96 million and decrease in other financial assets of

1,266.60 million. This was also offset by the increase in loan assets of Rs. 5,093.54 million.

Investing Activities

Net cash used in investing activities was Rs. 413.93 million for the 2025-26, which primarily related to investment in security receipts of Rs. 1,207.73 million, and purchase of tangible assets (including capital advances) and intangible assets of Rs. 108.52 million, which was partially offset by redemption of security receipts of Rs. 655.11 million and income from mutual fund investments of Rs. 106.04 million.

Net cash used in investing activities was Rs. 1,277.86 million for the 2024-25, which primarily related to investment in security receipts of Rs. 1,933.80 million, investment in government securities of Rs. 1,254.11 million, and purchase of tangible assets (including capital advances) and intangible assets of

207.32 million, which was partially offset by redemption of term deposits with banks (net) of Rs. 1,763.02 million and Income from mutual fund investments of Rs. 193.28 million.

Financing Activities

Net cash generated from financing activities was Rs. 6,256.16 million for the 2025-26. This is primarily attributed to proceeds from borrowings including securitisation arrangement of

71,537.99 million and proceeds from debt securities of

10,340.15 million. It was offset by repayment of borrowings including securitisation arrangement of Rs. 61,552.78 million, repayment of debt securities of Rs. 5,387.29 million and finance cost paid of Rs. 8,572.94 million.

Net cash used in financing activities was Rs. 14,846.41 million for the 2024-25. This primarily related to repayment of borrowings including securitisation arrangement of Rs. 57,880.60 million, repayment of debt securities of Rs. 4,727.65 million and finance cost paid of Rs. 9,428.12 million. It was offset by proceeds from borrowings including securitisation arrangement of

56,868.87 million and proceeds from debt securities of

664.00 million.

Capital Expenditure

During the 2025-26 and 2024-25, we invested Rs. 108.52 million and Rs. 207.32 million, respectively in capital expenditure. The following table sets forth our capital expenditure for the periods mentioned:

Particulars	2025-26	2024-25
Tangible assets (including capital advances and capital work-in-progress)	104.89	207.32
Intangible assets (including capital advances and capital work-in-progress)	3.63	Nil
Total	108.52	207.32

Assignment Arrangements

During FY 2025–26 and FY 2024–25, the Company has assigned loans of Rs. 15,516.63 million and Rs. 18,463.91 million, respectively. The following table sets forth information regarding our direct assignment activity during the financial years.

Particulars	2025-26	2024-25
Total book value of the loan asset assigned	15,516.63	18,463.91
Sale consideration received for the loan asset assigned	13,485.96	16,213.09

Contingent Liabilities and Commitments

In 2025-26, bank guarantee provided by the Company amounted to Rs. 5 million.

Capital to Risk Asset Ratios

The NBFC-SI Master Directions require all NBFC-MFIs to maintain a capital adequacy ratio consisting of Tier-I and Tier-II capital that is not less than 15% of their aggregate risk-weighted assets. The Companys capital to risk assets ratio as of March 31, 2026 and March 31, 2025 was 23.92% and 27.85% respectively.

The capital adequacy information of the Company is as indicated below:

Key financial ratios

Particulars	2025-26	2024-25
Tier-I capital (1)	21,485.98	21,925.83
Tier-II capital (2)	Nil	368.07
Total Tier-I and Tier-II capital	21,485.98	22,293.90
Total risk-weighted assets	89,835.19	80,038.89
Tier-I capital to risk assets ratio (%)	23.92%	27.39%
Tier-II capital to risk assets ratio (%)	0%	0.46%
Total capital to risk assets ratio(%) (3)	23.92%	27.85%

Notes:

(1) T ier-I capital include (i) paid-up capital (ordinary statutory reserves and other disclosed free reserves, if any; (ii) perpetual non-cumulative preference shares eligible for inclusion as Tier-I capital, subject to laws in force from time to time; (iii) innovative perpetual debt instruments eligible for inclusion as Tier-I capital; and (iv) capital reserves representing surplus arising out of sale proceeds of assets, as reduced by investment in shares of other NBFCs and in shares, debentures, bonds, outstanding loans and advances, including hire purchase and lease finance made to and deposits with subsidiaries and companies in the same group exceeding, in aggregate, 10% of the owned fund as defined in the Master Circular on Prudential Norms on Capital Adequacy, Basel I Framework dated July 01, 2015 issued by the RBI.

(2) T ier-II capital include undisclosed reserves, reserves, general provisions and loss reserves, hybrid capital instruments, subordinated debt and investment reserve account to the extent the aggregate does not exceed Tier-I capital. (3) The total capital to risk assets ratio is capital funds (Tier-I capital plus Tier-II capital) divided by risk-weighted assets (the weighted average of funded and non-funded items after applying the risk weights as assigned by the RBI).

Human Resources

The Companys people philosophy is rooted in a deep sense of purpose, positioning every employee not merely as a contributor to business, but as a participant in a larger mission of financial inclusion and womens empowerment. This sense of meaning is carefully nurtured through a culture built on trust, openness, and shared values, where employees are encouraged to take ownership, voice ideas, and grow with confidence. From structured onboarding programmes that help new joiners find alignment early on, to continuous, role-based learning and field immersion that build both capability and empathy, the organisation invests meaningfully in every stage of the employee journey. Frontline teams, in particular, benefit from hands-on exposure to customer realities, enabling them to serve with greater understanding and impact. Leadership remains accessible and engaged, reinforcing this culture through regular interactions, recognition of contributions, and encouragement of innovation. Platforms like Process Champions and internal mobility opportunities further strengthen knowledge sharing and career progression. At the same time, digital tools, including HRMS and emerging AI-led learning initiatives, enhance productivity and enable more efficient ways of working. Theas Company also places strong emphasis on fostering an inclusive and supportive workplace. Engagement platforms like All Ideas Matter (AIM), First Step, Milestone, and LeadHER give employees a voice and a sense of belonging, ensuring that their ideas and experiences shape the organisations journey. The HER platform provides a safe, confidential space for women employees, while initiatives such as Pink Hiring actively promote gender diversity and inclusion.

Employee well-being is addressed through a holistic framework. The Mental Wellness Cell offers professional psychological support, regular health check-ups, targeted wellness programmes, and financial well-being initiatives that help employees manage life beyond work. For a field-intensive workforce, these efforts are complemented by structured processes, training, and on-ground support that ensure both safety and balance.

Recognition programmes such as Star Branch Awards celebrate not just performance, but the real impact employees create in customers lives, instilling pride and strengthening team spirit. Together, these initiatives foster an environment where employees feel valued, heard, and inspired, enabling both personal and professional growth, while contributing to a meaningful and enduring social impact.

Please refer to page 58 of the Annual Report for a more detailed overview regarding the Human Resource initiatives and people practices.

Environment, Social and Governance (ESG)

MMLs ESG approach is centred on driving meaningful community impact while embedding sustainability and strong governance into its core operations. The Company actively advances community upliftment through targeted developmental initiatives, alongside adopting practices that promote environmental responsibility and resource conservation.

Simultaneously, it upholds a robust governance framework anchored in transparency, accountability, and ethical leadership, ensuring responsible and resilient business practices. This consistent focus on governance excellence is reflected in a score of 82.2 achieved during the reporting year, underscoring the Companys commitment to high standards of compliance and corporate integrity.

Please refer to page 54 to 61 of the Annual Report for a more detailed overview regarding the ESG initiatives.

Risk Management

MML is transforming its risk management framework into a dynamic, intelligence-led function, enabling faster, sharper, and more adaptive decision-making in line with evolving customer behaviour. At the core of this approach is a proprietary in-house scorecard built on deep internal data and behavioural insights. This enables finer risk segmentation, improved credit assessment, and stronger alignment with portfolio strategy. The integration of AI across the credit lifecycle has further strengthened underwriting and decision-making capabilities. Enabling real-time, context-aware evaluations using advanced inputs such as voice, image, and location intelligence enhances assessment quality, particularly for new-to-credit customers. The Company has also shifted from a reactive to a proactive risk management approach through AI-driven analytics. Early Warning Signals (EWS), dynamic risk rating, and sentiment analysis enable the timely identification of potential delinquencies and the development of more effective customer engagement strategies. These capabilities are complemented by AI-powered analytics that accelerate insights across sourcing, underwriting, and collections, improving both speed and precision of decision-making. This evolving framework is supported by strong governance practices, including continuous model recalibration, bias detection, and explainable AI. Together, these measures ensure fairness, transparency, and regulatory compliance while maintaining high portfolio quality.

Please refer to page 64 of the Annual Report for a more detailed overview regarding the Risk Management and Mitigation Strategies.

Internal Control Systems

The Company has implemented a strong and well-structured internal control framework, supported by clearly defined operational and financial policies and procedures. This system reinforces the accuracy, reliability, and integrity of financial reporting while ensuring strong maintenance of accounting records. It facilitates effective oversight of business operations, safeguards assets against misuse or loss, and promotes strict adherence to applicable laws, regulations, and internal governance standards.

Cautionary Statement

The Management Discussion and Analysis report outlines the Companys goals, assumptions, forecasts and expectations. However, the actual outcomes may vary significantly. A number of factors, such as changes in tax laws, governmental regulations, the Indian economy, or unforeseen circumstances, could affect the Companys performance.