Paragon Finance Ltd Management Discussions

The Directors have pleasure in presenting the Management Discussion and Analysis Report for the year ended on 31^st March, 2025. This Report has been included in consonance with the Code of Corporate Governance as approved by the Securities and Exchange Board of India (SEBI).

ECONOMIC OVERVIEW

In 2025, the global economic landscape, as projected by the IMF, anticipates steady growth at 3.3% for both 2025 and 2026, while global inflation is expected to decline from 5.9% in 2024 to 4.2% in 2025 further to 3.5% in 2026. Advanced economies are likely to reach their inflation targets sooner than emerging markets, indicating a gradual normalization across different economic regions.

The World Bank, however, underscores several downside risks including geopolitical tensions, trade tensions, policy uncertainty, and impact of tariffs, which could potentially hinder global economic stability and growth prospects.

Indias growth trajectory remains healthy. For FY 2024-25, the Ministry of Statistics estimates a real GDP growth of 6.5% and nominal GDP growth of 9.8%. In the final quarter (Q4), GDP and GVA expanded by 7.4% and 6.8%, respectively. The IMF India country report forecasts 6.5% real GDP growth and moderating inflation at 4.8% in 2024-25. The RBIs Financial Stability Report also highlights Indias macroeconomic resilience.

India continues to rank fifth globally with a nominal GDP of approximately USD 3.95 trillion in 2024 . GDP per capita rose notably, from ^2.12 lakh in 2023-24 to ^2.35 lakh in 2024-25 (USD 2,936).

INDUSTRY OERVIEW

The Non-Banking Financial Companies (NBFCs) sector in India has shown remarkable growth, establishing itself as a pivotal entity within the nations financial landscape. Since its inception, the sector has undergone significant evolutions, particularly in areas like housing finance, microfinance, and consumer finance, which have substantially contributed to its expansion. This progress has been propelled by factors such as a burgeoning middle class, enhanced financial inclusivity, and supportive policy measures.

While analysts had initially forecast a slowdown in Indias commercial vehicle (CV) sector for fiscal year 2024-25, the industry demonstrated resilience by delivering flat wholesale volumes, surpassing earlier expectations of a 4-7% decline. According to ICRA, CV industry is expected to register a modest 3-5 per cent year-on-year (YoY) growth in wholesale volumes in FY2026, driven by the revival in construction and infrastructure activities and a stable macroeconomic environment

In summary, while challenges in the CV segment are anticipated, the overall outlook for Indias automobile sector underscores resilience and the potential for recovery, supported by ongoing policy interventions and evolving consumer dynamics.

RISK MANAGEMENT

The Company has a well-defined Integrated Risk Management (IRM) Policy, approved by the Board and reviewed regularly. This framework covers all major risks such as credit, market, operational, liquidity, compliance, reputational, financial, and people risks.

Our approach is to identify risks early, measure them carefully, take timely action, and report transparently. We also track Key Risk Indicators (KRIs) on a continuous basis to ensure business objectives are achieved without disruption.

Risk management is actively led by Senior Management, reflecting our commitment to embedding a strong risk culture across the organization.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has a well-established system of internal controls suited to its operations. These controls ensure efficient functioning, safeguard assets, maintain compliance with regulations, and help prevent fraud. The Internal Audit function provides independent assurance on the effectiveness of these controls through a risk-based annual audit plan approved by the Audit Committee, which reviews findings and corrective actions on a regular basis.

In addition, the Company maintains strong internal controls over financial reporting to minimize the risk of material misstatements. These controls are regularly tested to ensure the accuracy, reliability, and integrity of the financial statements.

HUMAN RESOURCE

The Company considers its employees as its greatest strength and the driving force behind its growth. We place strong emphasis on engaging and motivating our workforce, ensuring their well-being through supportive policies, and maintaining a safe, inclusive, and positive work environment. Our HR practices encourage equal opportunities, continuous learning, and professional development, while aligning employee aspirations with organizational goals. With strong industrial relations and a people-first approach, the Company believes its human capital is central to building sustainable growth and long-term competitive advantage.

CAUTIONARY STATEMENT

The statements in the management discussion and analysis report outlining objectives, opportunities, and projections are “forward-looking”. Actual results may differ from those expressed or implied expectations. These statements are not guarantees of future performance, as they are inherently subject to risks and uncertainties, including but not limited to government policies, taxation, macroeconomic factors, and other external factors.

KEY FINANCIAL RATIOS

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 (Amendment Regulations) the company is required to give details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios

The Operating Profit Ratio for the FY 2024-25 was 25.26% as compared to 49.39% in previous year. The change in the Operating Profit Ratio is -48.85% as compared to previous year.

The Net Profit Margin Ratio for the period under review is 14.32% as compared to 24.28% in previous year which amounts to a change of -41.02 % approximately as compared to previous year.

The Interest Coverage Ratio for the period under review was 1972 times as compared to 3592 times in previous year.

The Current Ratio for the period under review was 15.24 as compared to 83.87 in previous year. The change in the Current Ratio is -81.83%.

In conclusion, the key financial ratios for FY 2024-25 show significant variations as compared to the previous year. The decline in Operating Profit Ratio and Net Profit Margin Ratio is primarily attributable to the lower-than-expected profitability, as the Company was unable to achieve its anticipated growth targets. The decline in the Current Ratio is on account of higher short-term liabilities during the year, which the Company continues to monitor and manage through prudent working capital planning. The Company remains committed to improving operational performance and maintaining financial discipline to drive long-term shareholder value.