Northlink Fiscal & Capital Services Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS:

GLOBAL ECONOMY OVERVIEW

The global economy demonstrated resilience during FY 2025-26 despite geopolitical conflicts, trade uncertainties, elevated public debt levels, and a prolonged period of restrictive monetary policy. According to the International Monetary Fund (IMF), global economic growth is estimated at 3.0% in 2025 and is projected to improve marginally to 3.1% in 2026, remaining below the historical average of 3.7% (2000-2019). Global headline inflation is estimated to moderate from 5.8% in 2024 to around 4.2% in 2025 and is expected to decline further to 3.6% in 2026.

The United States is expected to grow by approximately 1.8%, China by 4.0%, the Euro Area by 1.0%, and Japan by 0.6%, while India continues to remain the fastest-growing major economy with GDP growth of over 6.2%. Easing inflation, improving global trade, resilient labour markets, and increasing investments in digital infrastructure and renewable energy are expected to support economic activity.

OUTLOOK

The global outlook remains cautiously optimistic, supported by declining inflation, gradual monetary policy normalization, improving supply chains, and recovering international trade. However, downside risks continue to stem from geopolitical tensions, commodity price volatility, climate-related disruptions, elevated sovereign debt, and financial market uncertainties. Financial institutions are expected to benefit from improving credit demand, digital transformation, and growing investments in sustainable finance while maintaining prudent risk management practices.

Overview:

INDIAN ECONOMIC OVERVIEW

India continued to be the fastest-growing major economy during FY 2025-26, supported by robust domestic consumption, public capital expenditure, digital transformation, and strong macroeconomic fundamentals. As per the National Statistical Office (NSO), Indias real GDP is estimated to grow by around 6.5% during FY 2025-26.

Indias nominal GDP is estimated to exceed 356 lakh crore, making it the fourth-largest economy globally in nominal terms during the year. Gross Fixed Capital Formation (GFCF) remained above 33% of GDP, reflecting sustained investment activity. Manufacturing, construction, financial services, and digital sectors continued to support economic growth.

The Governments continued emphasis on infrastructure development through the National Infrastructure Pipeline (NIP), PM Gati Shakti, Production Linked Incentive (PLI) Schemes, Digital India, Make in India, Startup India, and financial inclusion initiatives continued to strengthen long-term growth prospects.

Indias foreign exchange reserves remained comfortable at over US$700 billion, while the banking system maintained healthy capital adequacy and improving asset quality. Credit growth remained robust across retail, MSME, agriculture, housing, and infrastructure segments.

Inflation

The financial sector plays a fundamental role in its economys growth and sustainable development. However, some macroeconomic variables can impact the performance of this sector, one of them being inflation. Inflation occurs when there is a general increase in the price of goods and services, which lead to a fall in the purchasing value of money.

Retail inflation remained largely within the Reserve Bank of Indias tolerance band during FY 2025-26. Consumer Price Index (CPI) inflation averaged around 4.5%, supported by prudent monetary policy, improved food supply management, and moderation in fuel prices. Food inflation witnessed temporary volatility due to weather-related factors, while core inflation moderated during the year.

The Reserve Bank of India maintained a balanced monetary policy to ensure price stability while supporting economic growth. Stable inflation expectations are expected to improve borrowing capacity, consumer confidence, and overall credit demand.

INDUSTRY OVERVIEW

NBFC Sector Analysis

Non-Banking Financial Companies (NBFCs) continue to play a vital role in Indias financial system by providing credit to under-serve and under-banked customer segments. NBFCs complement the banking sector by serving retail borrowers, MSMEs, self-employed professionals, rural customers, first-time borrowers, and niche financing segments.

As of March 2025, India had over 9,000 registered NBFCs, with the sector accounting for approximately 22-25% of total institutional credit in the country. The NBFC sectors Assets Under Management (AUM) have continued to witness healthy double-digit growth, supported by increasing retail credit demand, improving digital lending capabilities, and rising financial inclusion.

Key growth drivers include:

Rising consumption and retail financing. Expanding MSME credit demand. Vehicle and electric vehicle (EV) financing. Affordable housing finance. Digital lending and paperless onboarding. Co-lending partnerships with banks. Fintech collaborations and embedded finance. Government focus on entrepreneurship and financial inclusion.

At the same time, the sector continues to face challenges such as increasing funding costs, intense competition from banks and fintechs, evolving customer expectations, liquidity management, cyber security risks, and regulatory compliance requirements.

Well-capitalized NBFCs with strong governance, diversified funding sources, prudent underwriting standards, and technology-driven operating models are expected to continue outperforming the industry.

EVOLVING REGULATORY LANDSCAPE

Over the past few years, financial services as a sector has come under increased scrutiny and therefore, greater regulatory supervision. This is especially true for NBFCs, as over the years, the sector has undergone considerable evolution in terms of size, complexity and interconnectedness within the financial sector. With a view to bridge the regulatory gaps between the Banks and NBFCs, NBFCs are now increasingly being subject to regulations and guidelines at par with banks. Some of the key regulations and guidelines aimed at bringing this regulatory convergence between the Banks and NBFCs are:

Scale Based Regulations where NBFCs would be classified into layers on the basis of their size, activity and perceived risk. The regulations would put in place enhanced regulatory standards pertaining to Capital, Prudential and Governance requirements. NBFCs which warrant enhanced regulatory requirements based on a set of parameters and scoring methodology will feature in the upper layer, while the middle layer will comprise of deposittaking NBFCs irrespective of asset size, non-deposit-taking NBFCs with assets worth Rs 1,000 crore or more, as well as Housing Finance Companies.

The lowest layer will comprise NBFCs currently classified as non-systemically important non-deposit taking NBFCs (NBFC-ND). The threshold for NBFCs falling in the layer will be raised to Rs. 1,000 crore.

The middle layer will consist of systemically important non-deposit taking NBFCs (NBFC-ND-SI) and deposit taking NBFCs (NBFC-D). In addition, a few other types of NBFCs, such as housing finance companies (HFCs), infrastructure finance companies, infrastructure debt funds, standalone primary dealers (SPDs) and core investment companies (CICs) will also feature in this layer on the basis of their activity. These NBFCs shall be subject to regulatory structure as applicable for NBFC-ND-SI and NBFC-D at present.

The upper layer will consist of only those NBFCs which are specifically identified as systemically significant among NBFCs, based on a set of parameters, viz., size, interconnectedness, complexity and supervisory inputs. In addition to the regulations applicable to the previous layer, a set of additional regulations will apply to these NBFCs.

Prompt Corrective Action (PCA) framework prescribed for NBFCs as a tool for effective market discipline, to enable Supervisory intervention at appropriate time which require NBFCs to initiate and implement remedial measures in a timely manner, so as to restore its financial health. With the NBFC sector witnessing a high growth trajectory over the past decade and substantial inter-connectedness within the financial ecosystem, this framework is expected to further strengthen the supervisory tools available to the regulator to manage NBFCs.

RBI circular dated November 12, 2021, pertaining to asset classification of NBFCs, whereby certain aspects such as classification of an account as Special Mention Account (SMA) and Non-Performing Asset (NPA) were clarified / harmonized. This has again been brought to ensure uniformity in the implementation of Income Recognition, Asset Classification and Provisioning norms across all lending institutions.

RBI has tightened the norms around appointment of Auditors with issue of Guidelines on appointment of Statutory Auditors with a view to strengthen governance relating to appointment of auditors and to improve the overall quality and standards of financial reporting of RBI regulated entities. It sets out the criteria for audit firms regarding the number of audits they can take at a time and how they should conduct it, while requiring joint audits for entities with asset size of more than Rs. 15,000 crore.

Extending Risk Based Internal Audit framework to NBFCs to enhance the quality and effectiveness of their internal audit systems and processes. It requires internal audit function to broadly assess and contribute to the overall improvement of the Organizations governance, Risk Management and control processes using a systematic and disciplined approach.

Amendment in Listing Obligations and Disclosure Requirements by SEBI enhancing Disclosure norms and Compliance requirements for debt listed entities. Multiple provisions which were hitherto applicable only to equity listed entities were made applicable to High Value Debt Listed Entities ("HVDL"). HVDLs are entities with listed NCDs having outstanding value of Rs. 500 crore and above. Further, certain provisions which were already applicable to debt listed entities have also been amended resulting in additional compliances. The amendments encompassed areas such as board composition including independent directors, related party transactions, and corporate governance requirements, disclosure of information, financial results and submissions to stock exchanges among others.

Introduction of guidelines on declaration of dividends by NBFCs with the intent to infuse greater transparency and uniformity in practice. It requires NBFCs to comply with the minimum prudential requirements including capital adequacy and net NPA levels to be eligible to declare dividend within the prescribed Dividend Payout ratio.

While the parity in regulations is expected to improve the overall health and shore up the governance standards for the NBFCs in the medium to long term, the sector may face some headwinds in the immediate to short term. However, the impact may not be significant for larger, well capitalized NBFCs such as TCFSL which are well placed to navigate the evolving regulatory landscape.

OPPORTUNITIES & THREATS, PERFORMANCE AND OUTLOOK

The Company is expecting good opportunities in the upcoming financial year. Interest Income is the main source of the revenue of the company, so Board has taken a balanced approach for granting loan to the different sectors of the economy. Board has always adopted a cautious approach with respect to granting a loan to the existing consumers as well as also takes a proactive approach to explore the new opportunities and market for its business with limited level of risk. After stabilization for existing business, the company will foray into other related areas to have good growth in future.

However, threats are perceived from its existing and prospective competitors in the same field also the changes in the external environmental may also present threats to the industry i.e. Inflationary pressures, slowdown in policy making and reduction in household savings in financial products, Competition from local and multinational players, Execution risk, Regulatory changes, Attraction and retention of human capital are the major setbacks for NBFCs. The company bears the normal risk in terms of inherent business risk in the kind of business the company is into.

The biggest challenge before NBFCs is that they are facing competition from banks and financial institutions, due to their ability to raise low cost funds which enables them to provide funds at much cheaper rate. More stringent capital adequacy norms have been stipulated by RBI for NBFCs which is making difficult for them to give cheaper finance.

SEGMENT WISE / PRODUCT WISE PERFORMANCE

The Company being a NBFC mainly engaged in loan and other financing activities during the year under review, hence there was no requirement of segment-wise reporting.

INTERNAL CONTROL AND THEIRADEQUACY Internal Control measures and systems are established to ensure the correctness of the transactions and safeguarding of the assets of the Company. The Management ensures adherence to all internal control policies and procedures as well as compliance with regulatory guidelines. The audit committee of the Board of Directors reviews the adequacy of internal controls. This has improved the management of the affairs of the Company and strengthened transparency and accountability

Risk and Concerns:

The NBFC industry in general faces the risk of re-entry and new entry of players and existence of several unorganized regional players increasing the competition which mainly affects the asset quality.

This is further characterized by captive NBFCs floated by other business houses. The ever existing systemic and delinquency risks and fluctuations in interest rates make the companies more vulnerable. Due to stiff competitions in the finance field where the companys activities are centered in, the overall margins are always under pressure, but maintainable with the constant effort and good services rendered by the company. Deployment of funds in sensitive and volatile sectors increases the risk exposure while concentration risk increases dependency.

The companys business may be impacted by introduction of new policies or changes in existing policies. The companys management team keeps a close eye on policy regulations and formulates company plans appropriately.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Company has achieved total revenue Rs. 76.86 Lakh/- and profit of Rs. 11.70 Lakh/-

MATERIAL DEVELOPMENT IN HUMAN RESOURCES AND INDUSTRIAL RELATIONFRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

Your company continues to lay great stress on its most valuable resource people. Continuous training, both on the job and in an academic setting, is a critical input to ensure that employees at all levels are fully equipped to deliver a wide variety products and services to the customers of the company. The company had employed 4 persons during the financial year 2025-26. Industrial Relations throughout the year continued to remain very cordial and satisfactory.

KEY FINANCIAL RATIOS

Ratio	31.03.2026 (In %)	31.03.2025 (In %)	Variation
Current Ratio	3.32	3.77	-11.94
Debt Equity Ratio	32.53	27.04	20.29
Net Profit Margin	15.22	-197.30	-107.72
Operating Profit Margin	N.A.	N.A.	N.A.
Inventory Turnover Ratio	N.A.	N.A.	N.A.
Debtor Turnover Ratio	N.A.	N.A.	N.A.
Interest Coverage Ratio	N.A.	N.A.	N.A.
Return on Capital Employed	7.15	-9.62	-174.32
Return on Investment	5.36	-7.57	-171.25
Return on Equity Ratio	0.023	-0.155	-114.62
DSCR	2.10	-5.21	100.00
Capital to Risk Weighted Asset Ratio	128.67	153.05	-15.83
Liquidity Coverage Ratio	33.97	145.73	-76.69

DETAILS PERTAINING TO NET-WORTH OF THE COMPANY:

Particulars	31.03.2026 (In Rs. Lakh)	31.03.2025 (In Rs. Lakh)
Net worth	515.29	503.59

DISCLOSURE OF ACCOUNTING TREATMENT:

The Company has followed the same Accounting Standard as prescribed in preparation of Financial Statements.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report describing our company objectives, expectations or predictions may be forward looking within the meaning of applicable regulations and other legislations. Actual results may differ materially from those expressed in the statement. Important factors that could influence company operations include global and domestic financial market conditions affecting the interest rates, availability of resources for the financial sector, market for lending, changes in regulatory directions issued by the Government, tax laws, economic situation and other relevant factor.