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, 2026. 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

The global economy remained resilient during 2025 despite geopolitical conflicts, trade uncertainties and inflationary pressures. According to the International Monetary Fund (IMF), global economic growth is estimated at around 3.0% during 2025, supported by easing inflation and improving financial conditions.

India continued to remain the fastest-growing major economy in the world, recording an estimated GDP growth of around 6.5% during FY 2025-26. Supported by strong domestic consumption, robust public investment, digital transformation and manufacturing growth, India also emerged as the 6th largest economy globally by nominal GDP, with an economy exceeding USD 4.5 trillion. Inflation remained within the Reserve Bank of Indias tolerance band, while the banking and financial sectors continued to demonstrate resilience through healthy credit growth and improved asset quality.

The Governments continued focus on infrastructure development, financial inclusion, ease of doing business and digital public infrastructure is expected to support sustainable economic growth. However, global geopolitical developments, commodity price volatility and external economic uncertainties continue to pose risks to the growth outlook.

INDUSTRY OERVIEW

The NBFC sector continues to play a significant role in the Indian financial system by providing credit to retail customers, MSMEs, commercial vehicles and other underserved sectors. The sector witnessed stable credit growth during FY 2025-26, supported by improving economic activity, rising demand for financing and strengthening regulatory oversight by the Reserve Bank of India.

The commercial vehicle financing segment is expected to maintain steady growth, driven by increased infrastructure spending, logistics expansion and replacement demand. The Company remains well positioned to capitalize on these opportunities while maintaining prudent risk management practices.

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 2025-26 was -12.78% as compared to 25.26% in previous year. The change in the Operating Profit Ratio is -150.61% as compared to previous year.

The Net Profit Margin Ratio for FY 2025-26 was -88.07% as compared to 14.32% in FY 2024-25, representing a decrease of 715.19% over the previous financial year. The ratio turned negative primarily due to the net loss incurred during the year.

The Interest Coverage Ratio for FY 2025-26 was -115.03 times as compared to 1927.00 times in FY 2024-25. The ratio turned negative due to the operating loss before interest during the year.

The Current Ratio for FY 2025-26 was 4.24 times as compared to 7.77 times in FY 2024-25, representing a decrease of 45.42% over the previous financial year. The decrease is primarily attributable to a significant increase in current borrowings and other current financial liabilities during the year.

In conclusion, the key financial ratios for FY 2025-26 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.

For and on behalf of the Board of Directors Sd/-

Sanjay Kumar Gupta Whole-time Director DIN-00213467

Place: Collate