Nagreeka Capital & Infrastructure Ltd Management Discussions

1. Economic Outlook (a) Global Economy

The global economy is continuing growing at a modest pace, according to the OECDs latest Economic Outlook. The Economic Outlook projects steady global GDP growth of 3.1% in 2024, the same as the 3.1 % in 2023, followed by a slight pick-up to 3.2% in 2025.

The impact of tight monetary conditions continues being felt, particularly in housing and credit markets, but global activity is proving relatively resilient, the decline in inflation continues, and private sector confidence is improving.

The OECD unemployment rate stood at 4.9% in February, close to its lowest levels since 2001. Real incomes are rising in many OECD countries as inflation moderates, and trade growth has turned positive. The outlook continues to differ across countries, with weaker outcomes in many advanced economies, especially in Europe, and strong growth in the United States and many emerging market economies.

Headline inflation in the OECD is projected to gradually ease from 6.9% in 2023 to 5.0% in 2024 and 3.4% in 2025, helped by tight monetary policy and fading goods and energy price pressures. By the end of 2025, inflation is expected to be back on central bank targets in most major economies.

(b) Indian Economy

The Indian economy remains robust and stable, demonstrating resilience in the face of geopolitical challenges. The headline inflation rate is under control, though some specific items remain elevated. The trade deficit in Financial Year 2024- 2025 was lower compared to Financial Year 2023-2024, with the current account deficit around 0.7% of GDP. Foreign exchange reserves remain ample.

Indias economy carried forward the momentum it built in Financial Year 2023-2024 into Financial Year 2024- 2025 despite a gamut of external challenges. Indias real GDP grew by 8.2 per cent in Financial Year 2023-2024, exceeding 8 per cent mark in three out of four quarters of Financial Year 2023-2024. The focus on maintaining macroeconomic stability ensured that external challenges had minimal impact on Indias economy. The Governments thrust on capex and sustained momentum in private investment has boosted capital formation growth. Gross Fixed Capital Formation increased by 9 per cent in real terms in Financial Year 2023-24.

The fiscal balances of the general government have improved progressively despite expansionary public investment. Tax compliance gains driven by procedural reforms, expenditure restraint, and increasing digitisation helped India achieve this fine balance. The Central Governments timely policy interventions and the Reserve Bank of Indias price stability measures helped maintain retail inflation at 5.4 per cent - the lowest level since the pandemic. Core inflation dropped to a four-year low in Financial Year 2023-2024. Eased to a nine-year low in Financial Year 2023-2024.

Inflation remains the biggest concern both due to its impact on demand and due to its impact on margins and profitability.

Supply concerns and surge in input costs can force India Incs hand on prices, which would impact affordability and therefore demand which would not be ideal as private consumption accounts for around 60% of the gross domestic product. Regional GDP is projected to grow by 5.8% in 2024 (an upward revision of 0.6 percentage points since January) and 5.7% in 2025, below the 6.2% recorded in 2023.

Your Company will continue to look for opportunities to invest in companies which have consistent growth prospects with high quality earnings. In new age companies where valuations are a concern and whose earnings will fructify at a later stage in their development, the Company has made a small allocation of capital.

2. Future Outlook

According to CRISIL the Indian economy expects moderate to 6.4% growth in the next financial year, with a need to monitor the impact of the Middle East conflict on energy and logistics costs. The Indian economy is anticipated to experience a consistent growth of 6.7 percent annually from 2024 to 2031. This projection slightly surpasses the pre-pandemic average of 6.6 percent as per CRISIL.

CRISIL attributes this growth trend to capital, highlighting the governments investment-driven approach during a period when the private sector hesitated to make substantial investments. The governments notable increase in capital expenditure, supporting infrastructure projects and offering interest-free loans to state. After achieving a robust 7.3 percent growth in the current fiscal year, CRISIL predicts a moderation to 6.4 percent in the next financial year. Additionally, the report emphasises the importance of monitoring the Middle East conflicts impact on energy and logistics costs.

CRISIL research has projected oil prices extended losses slightly from the previous session in early Asian trading after an industry report showed builds in U.S. crude and fuel stockpiles, add ing to concerns around demand growth. Brent crude futures fell 14 cents, or 0.2%, to USD 77.38 a barrel by 0005 GMT. U S. West Texas Intermediate crude futures fell 18 cents, or 0.3%, to USD 73.07 a barrel.

While economic growth in FY2024-2025 will be driven by expected normal monsoon, higher public investment and private capex in select pockets supported by the Governments PLI scheme (Production Linked Incentive scheme), there will be headwinds from the global economic slowdown and higher commodity, especially oil prices. Indias annual consumer price index (CPI) inflation rate was 4.75% year-on-year, with 5.28% in rural areas and 4.15% in urban areas. This was the slowest increase in consumer prices in a year, and below market expectations of 4.9%. The Reserve Bank of India (RBI) projects inflation for the rest of 2024 2025 to be 4% in Q2FY25, 4.6% in Q3FY25, and 4.7% in Q4FY25. They also project real GDP growth at 6.5% for the financial year. The CPI factors depends on four factors as mentioned below:

1. If crude oil price averages more than $90 per barrel;

2. Pressure on core inflation from rising international prices of metals and minerals; 3. Pressure on food prices from elevated costs of edible oils and fertilisers; and 4. Imported inflation due to weak rupee.

3. Industry Structure and Developments

NBFCs have become important constituents of the financial sector and have been recording higher credit growth than scheduled commercial banks (SCBs) over the past few years. NBFCs are leveraging their superior understanding of regional dynamics and customised products and services to expedite financial inclusion in India. Lower transaction costs, quick decision making, customer orientation and prompt service standards have typically differentiated NBFCs from banks. Considering the reach and expanse of NBFCs, they are well-suited to bridge the financing gap in a large country like India. Systemically Important NBFCs have demonstrated agility, innovation, and frugality to provide formal financial services to millions of Indians.

Care Edge Rating findings reveal a robust annual growth in gross bank credit off which rose by 15.5% year on year (y-o y) in February 2023. This surge was observed across all sectors, with Non-Banking Financial Companies (NBFCs) and unsecured personal loans segments particularly driving the momentum. Notably, personal loans experienced accelerated growth, reaching 20.4% y-o-y in February 2023, up from 12.5% in the previous year. This surge was attributed to increased demand for other personal loans, credit cards, housing, and vehicle loans.

This is an enviable track record despite the business models of the NBFCs being severely tested by four large external events in the last few years, namely, (i) demonetization, (ii) GST implementation, (iii) failure of few large NBFCs, and (iv) the pandemic. The fact that many NBFCs have managed to overcome these stresses without significant impact on financial position is a testimony to their resilience and agility.

Given the systemic risks that the sector poses, the RBI issued ‘Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs on 22 October 2021 to make the financial sector sound and resilient while allowing a majority of

NBFCs to continue under the regulation-light structure. The objective behind this scale based approach is the principle of proportionality for regulating the non-banking financial companies. The purpose is to calibrate the degree of regulatory prescriptions based on the systemic importance of NBFCs and the contagion risk they pose to other entities in the financial system.

The regulatory vigil over the NBFCs continues with focus on four key cornerstones of (i) responsible financial innovation, (ii) accountable conduct, (iii) responsible governance, and (iv) centrality of the customer. We believe that NBFCs with superior capital adequacy, better margins, frugal cost management, prudent risk management and those incorporating above four key cornerstones in their business models will continue to deliver sustainable growth in the foreseeable future.

4. Opportunities and Threats

The success of any organization depends on its ability to identify strengths and opportunism and leverage them while mitigating the risk that arise while conducting the business. Your Company has taken all these factors into account in drawing up its plan for the future without losing its sight for its core market segments.

The NBFC sector has been providing credit to customers in the underserved and unbanked areas. NBFC is integral to the Indian Financial system, augmenting competition and diversification in the financial sector and complementing the banking system. Channelings the savings in capital formation, necessary for Indias economic growth and development. There is vast opportunities for NBFC sector to grow.

However, your Company operates in only the investment Segment and. its main business is acquisition of shares, stock, bonds, etc.

The volatility in stock indices in the financial year under report represents both an opportunity and challenge for the Company. Capital market activities in which most of our activities depend on is also influenced by global events happening in the US, UK & China and hence there is an amount of uncertainty in the near term outlook of the market. However, strong and stable government at center, the capital market prospect would significantly improve. The Present ongoing pandemic has affected the Capital Market and after correction in the market it has created good opportunity for the investment in secondary as well as primary market.

In financial services business, effective risk management has become very crucial. Your Company is exposed to credit risk, liquidity risk and interest rate risks. All these risks are continuously analysed and reviewed at various levels of management through an effective information system. The Company is having excellent Board of Directors who are Experts in financial sector, and are helping the Company in making good Investment.

5. Risk & Concern

The Company is exposed to various risks such as pandemic risk, credit risk, economic risk, interest rate risk, liquidity risk, cash management risk, technology risks, etc.

Your Company manages its liquidity risk in accordance with its Board approved Liquidity Risk Management Framework which incorporates the stipulations laid down by the RBI. The Company follows a prudent approach for managing liquidity and ensures availability of adequate liquidity buffers to overcome mismatches in case of stressed market environment

To effectively manage market risk on its investment portfolio, Your Company follows a prudent investment approach which guide its investment decisions. The Company has invested its surplus funds mainly in liquid and arbitrage funds; and deposits with banks and highly rated financial institutions. The Company calibrates the duration of investment portfolio to balance the twin objectives of maintaining liquidity for business and minimum adverse fair value change on its investment portfolio.

6. Internal Control System

The Company has well defined and adequate internal control system to safeguard all assets and ensure operational excellence. These systems are being regularly reviewed and wherever necessary are modified or redesigned to ensure better efficiency and effectiveness. The systems are subjected to supervision by the Board of Directors and the Audit Committee, duly supported by Corporate Governance. Company complies with all applicable statutes, policies, procedures, listing requirements and management guidelines.

7. Human Resource / Industrial Relations

Human resource is considered as key to the future growth strategy of the Company and looks upon to focus its efforts to further align human resource policies and processes to meet its business needs. The Company aims to develop the potential of every individual associated with the Company as a part of its business goal. Respecting the experienced and mentoring the young talent has been the bedrock for the Companys growth. Human resources are the principal drivers of change. They push the levers that take futuristic businesses to the next level of excellence and achievement.

8. Cautionary Statement:

This report contains forward-looking statements extracted from reports of Government Authorities / Bodies, Industry Associations etc., available in the public domain, which may involve risks and uncertainties including, but not limited to, economic conditions, government policies, dependence on certain businesses, and other factors. Actual results, performance, or achievements could differ materially from those expressed or implied in such forward-looking statements. This report should be read in conjunction with the financial statements included herein and the notes thereto. The Company does not undertake to update these statements.