NBI Industrial Finance Company Ltd Management Discussions

GLOBAL ECONOMIC OUTLOOK 2026:

The latest International Monetary Fund report has estimated global growth to be 3.1% for the calendar year 2026 marginally lower than the growth in 2025 which was 3.4%. The report cautions that if the present conditions of higher energy prices persists, global growth would further slow down to 2.5% and inflation would increase to 5.4%.

The financial year 2025-26 began with the US declaring April 2, 2025 as “Liberation Day”, announcing unprecedented tariff rates for every U.S.A. trading partner. Over the months that followed various trading partners negotiated to reach trade agreements on tariffs with the USA. Strangely, the world equity markets which had corrected sharply in April 2025 revived by May and have since remained buoyant, albeit volatile with frequent sentiment shifts, and increased dispersion in sectoral and regional performance.

Further, the policy uncertainty has resulted in a sharp rise in long term (basically 10 year) bond yields in USA, even in an uncertain environment of war in the Middle - East (between USA & Iran). This indicates a global rise in risk premiums reflected in Investors expectations of higher yields. If this situation are to persist it could impact equity valuations.

The Middle East countries has significantly suffered on account of the USA - Iran war, which began in late February 2026. The war had a marginal negative impact on United States of America, whereas Korea and Japan recorded a positive return for the quarter ended March 31,2026.

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.

On the domestic front, the government continued its push towards maintaining growth with fiscal and budgetary support. In September 2025, the government announced major reductions in GST rates resulting in improved festive season and auto sector demand. The priorities of the Union Budget declared in January 2026 was fiscal discipline, higher budgetary allocation for infrastructure and manufacturing incentives.

As per the RBI MPC report April 26, the GDP growth for 2026-27 is projected to be lower at 6.9% with inflation at 4.6%. The moderation in growth and increase in inflation are attributed to external factors. The West Asia conflict poses unprecedented supply chain disruption risk; elevated energy prices and constrained supply and may adversely affect domestic production in 2026-27. Remittances - Indias record $ 125 bn inflow in 2025, face pressure from the Gulf region disruption.

Your Company holds significant investments in Equity Shares of several 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 enhance the shareholders value.

During the year, the Union Cabinet approved an allocation of over Rs. 10,300 crore for the IndiaAI Mission, marking a significant milestone in strengthening Indias artificial intelligence ecosystem. The objective of this funding is to enable a structured and scalable implementation of the mission through a public-private partnership framework, focused on fostering innovation, research, and adoption of AI technologies across sectors.

Akey pillar of the initiative is the creation of IndiaAI Compute Capacity, which aims to develop a state-of-the-art AI computing infrastructure. This includes the deployment of more than 10,000 GPUs through strategic collaborations between the public and private sectors, ensuring affordable and scalable access to high-performance computing for startups, researchers, and enterprises.

As a result of these initiatives, India now ranks among the top five countries globally in newly funded AI companies and is also among the top ten globally in terms of private investment in AI in 2025, reflecting growing investor confidence in Indias Al-driven growth potential.

Foreign Portfolio Investors (FPIs) remained large net sellers in FY2026, divesting approximately Rs.1.80 lac crore worth of equities, as per SEBI data. One of the key factors driving this sustained outflow appears to be sharp downgrade in earnings growth expectations for FY 2026. Consensus Nifty 50 EPS growth estimates were significantly revised downwards from around 12.5% at the beginning of the year to approximately 5.9%.

As can be observed from the following illustration, Nifty 50 returns have fluctuated over the last 5 years reflecting a strong correlation to the combined effect of change in earnings growth expectations and FPI flows.

On a positive note, the consensus Bloomberg Analyst earnings forecast for Nifty 50 for the year 2026-27 is upwards of 15%. The corporate earnings performance over the coming quarters will decide the trend in the market. If corporate earnings visibility were to indicate a rebound to 15%+ growth, as forecasted, it would make India an extremely attractive destination on relative valuation and strong macros.

The rising SIP inflows resulting in expanding domestic mutual fund AUMs which have largely acted as support in these uncertain markets, could record a substantial appreciation if earnings growth is achieved as estimated.

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.