NCL Research and Financial Services Ltd Management Discussions

ANNUAL OVERVIEW AND OUTLOOK

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 persist 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. trading partner. Over the months that followed various trading partners negotiated and reached a trade agreement for revised tariffs with the US. 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.

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

As per Economic Survey 2025-26 Indias economic growth momentum remained strong through FY26, notwithstanding a challenging global backdrop characterized by geopolitical tensions, trade disruptions and uneven global recovery. Real GDP growth for 2025-26 is estimated at approximately 7.4%, reaffirming Indias position as the fastest growing major economy. Indias imports and exports recorded steady growth of 4.22% and 6.47%, respectively, reaching $970 billion and $860.09 billion. Consequently, the combined merchandise and services trade deficit widened to $119.30 billion in FY2025-26.

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.

During the year, the Cabinet approved an allocation of over ^10,300 crore for the IndiaAl 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. A key 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.

INDUSTRY OVERVIEW

Indias NBFC sector is on a sustained growth trajectory, with assets under management (AUM) expected to surpass 50 Lakh Crore in FY 2026-27 excluding government-owned NBFCs, as per CRISIL Ratings. NBFC credit growth has historically outpaced Indias GDP growth and this trend is expected to continue. The AUM growth trajectory reflects both its expanding relevance and demonstrated resilience within Indias financial ecosystem.

For FY 2025-26, the credit growth of NBFCs is estimated at 16.7% year on year, a slight moderation from 18.4% in FY 2024-25. Amid declining interest rates, NBFCs faced intense pricing competition from banks, particularly in housing, auto and MSME loans. However, NBFCs gained significant ground in the consumer durable segment, with their market share surging to 59% in FY 2025-26. While banks remained dominant in wholesale lending, NBFCs leveraged rising disposable income and rate cuts to drive retail expansion.

The near-term outlook remains constructive. For FY 2026-27, momentum is expected to gain further pace in specialised segments like Consumer Durable financing, with NBFC market share projected to reach 63%. Growth trajectories will nonetheless vary across segments, shaped by risk calibration, regulatory oversight and funding access. Balance sheet strength and funding diversification remain the critical differentiators.

OPPORTUNITIES & THREATS Opportunities

• One of the largest customer franchises, serving 22.9 Mn customers.

• Highly granular retail-focused book, significantly reducing concentration risk (top 20 customers contribute around

0.30% of loans).

• 18-year track record of tailored lending across Enterprise Lending, Asset Finance and Consumer Finance segments, with a deep understanding of local nuances across India.

• Robust credit underwriting and collection capabilities enabling competitive risk-adjusted returns for customers with minimal or no credit history.

• Rising credit demand in Tier 2, 3 and rural markets.

• Cross-sell potential through the existing customer base to a wide range of products and services.

• Growth in secured lending including LAP and gold loans.

• Growing digital adoption enabling cost efficiencies and wider reach.

Threats

• Regulatory tightening for NBFCs impacting capital and compliance requirements.

• Competitive intensity from banks, fintechs and other NBFCs.

• Macroeconomic volatility affecting borrower cash flows and asset quality.

• Interest rate fluctuations impacting spreads and funding costs.

• Exposure to economically sensitive segments such as commercial vehicles and MSME lending creates higher sensitivity to economic cycles and asset quality fluctuations.

• Higher credit costs during periods of portfolio stress.

RISKS AND CONCERNS

NCL Research & Financial Services Limited (NCL) has exposures in various line of business. NCL are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, human resource risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.

MARKET RISK

The Company has quoted investments which are exposed to fluctuations in stock prices. NCL continuously monitors market exposure in equity and, in appropriate cases, also uses various derivative instruments as a hedging mechanism to limit volatility.

LIQUIDITY AND INTEREST RATE RISK

The Company is exposed to liquidity risk principally, because of lending and investment for periods which may differ from those of its funding sources. Management team actively manages asset liability positions in accordance with the overall guidelines laid down by various regulators. The Company may be impacted by volatility in interest rates in India which could cause its margins to decline and profitability to shrink. The success of the Companys business depends significantly on interest income from its operations. It is exposed to interest rate risk, both as a result of lending at fixed interest rates and for reset periods which may differ from those of its funding sources. Interest rates are highly sensitive to many factors beyond the Companys control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and, inflation. As a result, interest rates in India have historically experienced a relatively high degree of volatility.

The Company seeks to match its interest rate positions of assets and liabilities to minimize interest rate risk. However, there can be no assurance that significant interest rate movements will not have an adverse effect on its financial position.

HUMAN RESOURCE DEVELOPMENT

The Company recognizes that its success is deeply embedded in the success of its human capital. During 2025-26, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles

Mumbai, September 4, 2026	By order of the Board For NCL Research & Financial Services Limited
Registered Office:	Sd/-
Office No. 208, Tulsiani Chambers, 2 nd Floor	Goutam Bose
212, Free Press Journal Marg, Nariman Point,	DIN:02504803
Mumbai-400021	Chairman & Managing Director

Sl. No.	In the Account of	Disclosures of amount at the year end and the maximum amount of loans/advances/Investments outstanding during the year.	Amount
1 .	Holding Company	o Loans and advances in the nature of loans to subsidiaries by name and amount	Nil
		o Loans and advances in the nature of loans to associates by name and amount	Nil
		o Loans and advances in the nature of loans to Firms/Companies in which directors are interested by name and amount	Nil
2 .	Subsidiary	o Loans and advances in the nature of loans to subsidiaries by name and amount	Nil
		o Loans and advances in the nature of loans to associates by name and amount	Nil
		o Loans and advances in the nature of loans to Firms/Companies in which directors are interested by name and amount	Nil
3.	Holding Company	o Investment by the loanee in the shares of parent Company and subsidiary Company has made a loan or advance in the nature of loan.	Nil

Mumbai, September 4, 2026	By order of the Board For NCL Research & Financial Services Limited
Registered Office:	Sd/-
Office No. 208, Tulsiani Chambers, 2 nd Floor	Goutam Bose
212, Free Press Journal Marg, Nariman Point,	DIN: 02504803
Mumbai-400021	Chairman & Managing Director