NBI Industrial Finance Company Ltd Management Discussions

The “WORLD ECONOMIC OUTLOOK UPDATE” report by the IMF of January 2025, stated that global growth is projected to remain stable at about 3.3% both in 2025 and 2026. However, the potential ramification of policies proposed by United States (US), has given rise to considerable uncertainty leading to lower expectations of global growth.

Further, the policy uncertainty has resulted in a sharp rise in long term bond yields in US, even in an environment of softening inflation and growth. This indicates a global rise in risk premiums reflected in Investors expectations of higher yields. If this situation were to persist it could impact equity valuations.

Global Scenario

In the euro zone, growth is expected to gradually pick up from 1.0 % in 2025 to 1.4% in 2026, boosted by the increasing budget spend of most Euro nations on Defence. Over the past few years, the euro area has seen lower economic growth than many other Western geographies. The recovery of private consumption in 2024 was low mainly because of higher individual savings rate, i.e. consumption growth has been lower than income growth. In the second quarter of2024, the eurozones savings rate stood at 15.7%, whereas in the pre-pandemic years the level was approximately 12.5%. InUS, the uncertainty from various policy announcements has resulted in a downward revision in economic outlook and real GDP growth of US could fall to approximately 2% for CY 25 and CY 26. On account of tariffs, inflation is expected to increase in CY 25 in US and remain higher than the Fed target of 2%. Growth in 2025 for China will also be impacted and growth may suffer. The impact of the fiscal package announced in November 2024 largely offsetting the negative effect of the downturn in the real estate market had resulted in higher growth expectations for CY25. Over the past few months Chinese equity markets had made a recovery and it was believed that perhaps the worst is over. However, President Xi mentioned in a conference in China, economic growth going forward will face a challenging external environment. Appropriate loose monetary policy and fiscal expansion will be undertaken in 2025. For China, the potential response to a substantial increase in tariffs could be a 5% to 7% depreciation of the yuan in 2025.

Indian Scenario

In India, growth is projected to be solid at 6.5% in 2025-26. In 2024, agricultural growth hit a five- quarter high of 3.5%, driven by strong monsoons, healthy kharif harvests and with improved rabi sowing in the second quarter. Services exports also surged 12.8% year over year, reaching US$248 billion from April to November 2024. Indian manufacturing is moving up the value chain with electronics, engineering goods, and chemicals now make up 31% of exports, supported by contributions from micro, small, and medium enterprises and rising credit availability. In the monetary policy of April 2025 - RBI did a Repo Rate cut of 25 bps to 6%, changed its stance to accommodative. This provides confidence to the stakeholders on the economic and credit growth.

Further, Indias direct tax collections were up 16.15 % year-on-year, reaching Rs 25.86 lac crore as

of March 2025, as per the data released by the Central Board of Direct Taxes (CBDT). Corporate tax collections rose to Rs 12.40 lac crore, up from Rs 10.10 lac crore in the previous fiscal.

The 22.77% growth in corporate tax collection vis-a-vis the far lower estimated Nifty earnings growth in single digit for FY 2024-25 clearly indicates that the profitability of smaller and midsize companies, both listed and unlisted, are growing at a substantially higher rate.

Indian Equity Markets:

Fils have been net sellers since September 2024, divesting an aggregate USD 19.34 billion in equities according to SEBI data, during the period 7 months from September 2024 to March 2025. Perhaps, the largest motivating factor for such a consistent and substantial negative stance on India was the FII expectation of a sharp fall in earnings growth in FY24-25. It may be noted that the earnings growth of the Nifty 50 for FY 2023-24 was as high as 24.1 %, on the back of which the Index appreciated 41.5% from June 2023 to October 2024. Regrettably, the estimated earnings growth for FY 2024-25 has fallen to 3.1 %. Resultantly, the Nifty 50 recorded a return of 5.3% for the year.

Current Bloomberg estimates show that the analyst community forecasts a growth in earnings of 14% for FY 2025-26. The corporate earnings performance over the next 6-9 months will decide the trend in the market. If corporate earnings visibility were to indicate a rebound to 14%, as forecasted, it would make India an extremely attractive destination on relative valuation and strong macros. This could result in a resurgence in Equity FII inflows.

The following graph is the Ratio of the PE of Nity 50 vis a viz PE of the MSCI World Index over last 15 years. This parameter measures the relative valuation of Indian markets relative to the world. The Shareholders may please observe that the average premium of Indian Market is 1.15X and over the years the Indian markets have always corrected or bounced back when deviated from the mean.

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INDUSTRY STRUCTURE & BUSINESS UPDATE

Non-Banking Financial Companies (NBFCs) bring in diversity and efficiency to the financial sector. In the recent past, NBFCs have played increasingly important role in resource mobilisation and credit intermediation, thereby helping commercial sector to make up for low bank credit growth. The Reserve Bank and the Government have taken several measures to address various challenges by enhancing systemic liquidity and strengthening the governance and risk management framework ofNBFCs.

During the financial year 2024-25 the Indian economy showed remarkable resilience and growth, amidst a challenging global landscape. The year witnessed a real GDP growth estimated at 6.4% by the National Statistical Office as compared to growth rate oil.6% during 2023-24.

OPPORTUNITIES AND THREATS

India is emerging as the fastest growing major economy in the world. Despite various geopolitical tensions worldwide, the economic growth of India was ensured by the government through various financial stimulus packages and the focus on infrastructural development.

The main business of the Company is investment activity carried out within India. As such there are no separate reportable segments or product wise performance reports applicable to the Company.

Your Company holds significant investments in Equity Shares of various diversified companies. Therefore, the business prospects of the Company largely depend on the business prospects and performance of its investee companies. As a long-term strategy, the Company is looking forward for a sustainable growth in its investee companies in the coming years which would help enhance the shareholders value.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The following review is intended to convey Managements perspective on the financial and operating performance of the Company during the F inancial Year 2024-25. This Report should be read in conjunction with the Companys financial statements and other information included in this Annual Report.

The Companys performance during the Financial Year 2024-25 on Standalone basis should be taken as satisfactory in the wake of challenging environment. Below is a brief quantitative overview of the financial and operational performance of your Company during the reporting period.

Standalone Results:

The Company has received during the year, Income by way of Dividend to the tune of Rs1,304.19 Lakhs. The total income is Rs1,399.03 Lakhs as against total income of Rs1,708.95 Lac in the

preceding year. The Profit before tax amounted to Rs 1,085.61 Lac as against Rs 1,463.03 Lac in the preceding year. Profit after tax stood at Rs848.50 Lac as against Rs1,105.05 Lac in the previous year (before Other Comprehensive Income). The Consolidated Profit after tax for the year amounted to Rs848.42 Lac. The lower income and profit can be attributed to lower profit from share purchase / sale activity.

OUTLOOK

A significant portion of the Companys income arises from investment and share sale / purchase operations, which are largely dependent on the condition of the stock market. The stock market activity depends largely upon the economic growth momentum and a combination of other factors like inflation, domestic savings, corporate earnings, stable tax regime, surging portfolio investments into India etc. The geopolitical tensions and unusual developments in the global economy may pose uncertainties and challenges for the emerging market economies like India. However, the Company has investment policy wherein it invests in those securities which have easy liquidity, better yield and potential for price appreciation in medium to long run.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company believes that a strong internal control framework is an important pillar of Corporate Governance. The Company has in place adequate internal financial control system which ensure orderly and efficient conduct of its business, safeguarding of its assets and accuracy and completeness of accounting records, timely preparation of reliable financial information and various regulatory and statutory compliances.

The system is aimed at covering all areas of operations. All transactions entered into by the Company are duly authorized and recorded correctly. The internal financial controls within the Company are commensurate with the size, scale and complexity of its operations. It has implemented suitable controls to ensure that financial transactions are reported with accuracy and that there is strict compliance with applicable laws and regulations. These controls are regularly reviewed internally for effectiveness. The Company has robust policies and procedures which, inter alia, ensure integrity in conducting its business, safeguarding of its assets, timely preparation of reliable financial information, accuracy and completeness in maintaining accounting records and the prevention and detection of frauds and errors.

KEY FINANCIAL RATIOS

In accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, the details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key standalone financial ratios are as follows:-

CAUTIONARY STATEMENT

Certain statements under "Management Discussion & Analysis" describing the Companys objectives, estimates, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Although the expectations are based on reasonable assumptions, the actual results could materially differ from those expressed or implied, since the Companys operations are influenced by many external factors beyond the control of the Company. Investors are cautioned that the Company assumes no responsibility to publicly amend, modify, revise or update any forward looking statement or opinion, on the basis of any subsequent developments, events or information.