Quest Capital Markets Ltd Management Discussions

Overview

The Indian Non-Banking Financial Company (NBFC) sector has sustained its position as an indispensable pillar of the countrys credit ecosystem, providing diversified financial services to segments that the formal banking system does not adequately serve. NBFCs continue to demonstrate agility and responsiveness in serving Micro, Small and Medium Enterprises (MSMEs), self-employed individuals, semi-urban and rural borrowers, and first-generation entrepreneurs, thereby meaningfully contributing to the Government of Indias financial inclusion objectives.

2. Opportunities and Threats

2.1 Opportunities

The NBFC sector is well-positioned to capitalise on several structural and cyclical opportunities during the current year and beyond:

Credit Expansion in an Easing Rate Environment: The RBIs cumulative 125 bps repo rate reduction during FY 2025-26 has materially eased funding costs. NBFCs with robust credit assessment frameworks are positioned to expand their loan books profitably as the transmission of lower policy rates flows through to NBFC borrowing costs (commercial paper, bank credit lines, and NCDs). Lower EMIs are also expected to support retail loan demand recovery.

MSME Lending Growth: NBFC MSME assets under management (AUM) are projected to cross 5.3 lakh crore in FY 2025-26, growing at a CAGR of approximately 32% from FY 2020-21 to FY 2023-24. NBFCs dominate the micro-Loan Against Property (LAP) segment and continue to be the primary formal credit channel for underserved MSMEs. The Governments continued thrust on manufacturing (PLI schemes) and the ‘Viksit Bharat 2047 agenda further underpin MSME credit demand.

Green and Transition Finance: Indias commitment to 500 GW renewable energy by 2030 and net-zero by 2070, combined with RBIs Sustainable Finance guidelines, creates a growing pipeline for green and transition lending. NBFCs are uniquely placed to develop bespoke products for EV financing, clean technology manufacturing, and agri-sustainability, given their product agility and proximity to borrowers.

Digital Credit Infrastructure: The RBIs Public Tech Platform for Frictionless Credit, the Open Credit Enablement Network (OCEN), and the Account Aggregator (AA) framework are enabling faster, consent-based credit underwriting and disbursement. NBFCs that invest in API-driven, data-led lending infrastructure are positioned to serve new-to-credit (NTC) borrowers at significantly lower operating costs.

2.2 Threats and Risk Factors

Notwithstanding the opportunities, the NBFC sector, faces several material risks and headwinds that require proactive monitoring and management:

Regulatory Compliance Intensity: This harmonisation with banking NPA norms may result in upward revisions to Gross NPA ratios for certain portfolios and necessitates enhanced early-warning and collection systems. Additionally, the NOF requirement for NBFC-ICC is scheduled to increase to 10 crore by 31st March 2027, requiring timely capital planning by smaller NBFCs.

Asset Quality Stress: RBIs Financial Stability Report (December 2025) flagged that stressed assets in the NBFC microfinance segment rose to 5.9% in March 2025, up from 3.9% in September 2024. Provision coverage for the broader NBFC sector moderated to 66.6% in FY25. While the Companys operations are focused on capital markets rather than retail lending, any systemic NBFC stress could tighten regulatory scrutiny across the sector.

Cybersecurity and Data Privacy: The RBIs Master Directions on IT Governance (2024) have significantly tightened cybersecurity requirements for NBFCs, including mandatory Cyber Crisis Management Plans, incident reporting protocols, and annual cybersecurity audits. Simultaneously, the Digital Personal Data Protection (DPDP) Act, 2023 and DPDP Rules, 2025 now require

NBFCs to operate as ‘Data Fiduciaries, with formal consent frameworks, data retention policies, and accountability for data processing. The Indian financial services sector remains a high-value target for cyberattacks, with digital payment volumes (UPI alone processing over 130 billion transactions annually) presenting an expanding attack surface.

Global Macroeconomic and Geopolitical Risks: Geopolitical tensions (including the Iran conflict flagged in mid-2026), US tariff uncertainties, a moderating global growth outlook, and INR depreciation pressures represent external risks to Indias growth trajectory. The RBIs shift to a neutral stance in its February 2026 MPC decision (holding repo rate at 5.25%) reflects this ws flo cautious external outlook. Volatile foreign portfolio investor (FPI) with net equity outflows recorded in certain periods of FY 2025-26 add to capital market uncertainty relevant to the Companys operations.

3. Future Outlook

Indias macroeconomic and financial sector outlook for FY 2026-27 remains broadly positive, underpinned by resilient domestic demand, policy continuity, and structural reforms. The RBI has projected real GDP growth of 6.9% for FY 2026-27, while the IMF projects 6.2-6.6% growth, and the World Bank projects 6.5%, reflecting broad international consensus on Indias sustained growth trajectory despite global headwinds.

The RBIs monetary policy stance remained neutral as at March 2026, with the repo rate at 5.25% following the cumulative 125 bps reduction during FY 2025-26. The easing cycle is expected to continue to provide a supportive funding environment for NBFCs into FY 2026-27, with the benefit of lower costs gradually transmitting through the financial system as existing borrowings reprice on rollover.

The NBFC sectors aggregate balance sheet is projected to grow to approximately 92.9 trillion by FY 2027-28, reflecting compound annual growth of approximately 16% from FY 2025-26 levels, driven by expanding retail credit, MSME financing, and services sector lending. NBFC credit is expected to reach approximately 22% of overall systemic credit by FY 2027-28. For capital market-oriented NBFCs such as the Company, the outlook is particularly favourable. GenAI and Large Language Model (LLM) adoption across NBFC operations from credit underwriting and portfolio monitoring to compliance reporting and customer engagement is expected to accelerate in FY 2026-27. The Company remains committed to maintaining its CRAR well above the regulatory minimum of 15% prescribed under the RBI SBR framework, sustaining its debt-free capital structure, ensuring full compliance with all applicable SEBI (LODR) and RBI regulatory requirements, The Companys objective when managing capital is to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stakeholders. The Company is focused on keeping strong total equity base to ensure independence, security, as well as a high financial flexibility for potential future borrowings, if required.

4. Business Segment Analysis

During the financial year ended 31st March 2026, the Companys operations continued to be concentrated in the Capital Markets and NBFC-Related Activities segment. The Companys principal business activities during the year encompassed:

Trading and dealing in listed equity securities and equity-linked instruments on recognised stock exchanges regulated by SEBI;

Investment in, and dealing in, units of mutual fund schemes (equity, debt, and hybrid categories) as permitted

Pursuant to Ind AS 108 - ‘Operating Segments, the Company has only one Reportable segment, hence the disclosure requirement under Ind AS 108 "Operating Segment" is not applicable.

All business is conducted within India and there are no reportable geographical segments.

5. Financial Results

The summarised financial performance of the Company for the financial year ended 31st March 2026, compared with the previous year, along with key ratios is set out below. Variance analysis is provided where the changes in the ratios exceeded by more than 20% from previous year.

(Rs. in lakhs)

Particulars	FY 2025-26	FY 2024-25
Profit Before Tax (PBT)	3,062.95	2,537.12
Net Profit After Tax (PAT)	2,352.95	1,962.57
Operating Profit Margin (%)	97.70	98.30%
Net Profit Margin (%)	75.05%	76.04%
Capital to Risk Weighted Assets Ratio (CRAR)	105.90%	122.40%
Current Ratio	67.49	151.13
Reason for variance: Due to investment of short funds in long term investments

Note: Debt Equity Ratio and Interest Coverage ratio is not relevant as Company has zero debt as on 31st March, 2026

5.1 Commentary on Current Year Financial Performance

Revenue	Total revenues of the Company for FY 2025-26 is Rs. 3,135.04 lakhs, showing an increase of 21.46% from previous year which is primarily on account of increase in dividend Income and fair value gain changes.
Operating Expenses	Operating and administrative expenses were managed prudently during the year and increase in expenses by 18% is primarily due to increase in employee benefit cost and other expenses.
Operating Profit	Operating profit for FY 2025-26 is marginally lower equivalent to 97.70% from 98.30% in previous year on account of increase in employee benefit expenses.
Finance Cost	The Company continues to maintain a zero-external-debt position. Accordingly, finance costs remain negligible and comprise primarily bank charges and incidental financial costs. This position is consistent with the Companys conservative capital management strategy.
Net Profit	Net profit for FY 2025-26 has been increased to Rs. 2,352.95 Lakhs which is significantly higher by 19.89% from the previous year, primarily due to increase in dividend income and net gain arising due to fair value changes.

5.2 Key Financial Ratios

Details of Key financial ratios have been provided in note no 36, 39, and 41 in the financial statements for the year ended 31st March,

2026.

6. Human Resources

The Company regards its human capital as its most valuable strategic asset. The Board and Management remain deeply committed to fostering a work environment characterised by professional integrity, meritocracy, mutual respect, continuous learning, and a strong culture of regulatory compliance - values that are particularly important in the context of the evolving regulatory environment for listed NBFCs.

During FY 2025-26, the Company maintained a lean and efficient workforce commensurate with its size, scale, and operational requirements. Key HR initiatives during the year included:

• Regulatory Upskilling and Compliance Training: Structured training programmes were conducted to keep employees abreast of significant regulatory developments during the year.

• Employee Engagement and Wellbeing: The Management maintained regular mechanisms for employee engagement, grievance redressal, individual development, ensuring alignment of individual contributions with organisational objectives.

• Talent Retention and Succession: Given the specialised nature of capital market operations and the increasing regulatory compliance requirements for listed NBFCs, the Company continued to invest in retaining key personnel and building cross-functional competencies to mitigate key-person risk.

7. Internal Controls and Their Adequacy

The Company has established and maintains a robust system of internal financial controls and operational controls commensurate with its nature, size, and complexity of operations, in compliance with the following regulatory requirements:

Section 134(5)(e) of the Companies Act, 2013 Directors Responsibility Statement on Internal Financial Controls;

Section 143(3)(i) of the Companies Act, 2013 Statutory Auditors report on the adequacy and operating effectiveness of Internal Financial Controls;

Regulation 17(8) read with Part B of Schedule II of SEBI (LODR) Regulations, 2015 Annual CEO/CFO Certification;

Regulation 18 of SEBI (LODR) Regulations, 2015 Audit Committee oversight;

RBI Master Directions on IT Governance, Risk, Controls and Assurance Practices, IT and cybersecurity control requirements.

7.1 Key Elements of the Internal Control Framework

The internal controls are supplemented by internal audits, reviewed by Audit Committee of Board of Directors. The internal control ensures that appropriate financial records are available for preparing financial statements and other data for showing a true and fair picture of the state of affairs of the Company.

Internal Audit: An independent internal auditor conducts periodic reviews of key financial and operational processes. Internal audit reports are presented to the Audit Committee of the Board on a quarterly basis, and action-taken reports are tracked to closure to ensure accountability.

Audit Committee: The Audit Committee of the Board, constituted in compliance with Section 177 of the Companies Act, 2013 and Regulation 18 of SEBI (LODR) Regulations, 2015, provides independent oversight of the Companys financial reporting integrity, internal control systems, compliance monitoring, and risk management framework. The Committee met at the required intervals during FY 2025-26.

• Compliance Management System: A dedicated compliance function monitors adherence to all applicable laws and regulations on an ongoing basis.

Related Party Transaction Monitoring: All related party transactions are reviewed by the Audit Committee in accordance with Regulation 23 of SEBI (LODR) Regulations, 2015 and the Companys Board-approved Related Party Transaction Policy, ensuring arms-length pricing and appropriate disclosures.

7.2 Statutory Auditors Assessment

The Statutory Auditors of the Company have, in their Report for FY 2025-26, confirmed the adequacy and operating effectiveness of the Companys internal financial controls with reference to the financial statements, in terms of Section 143(3)(i) of the Companies Act, 2013. No material weaknesses in the design or operating effectiveness of internal financial controls were or reported during the year.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations, and those relating to the industry and regulatory outlook, constitute ‘forward-looking statements within the meaning of applicable securities laws and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Such statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied, depending upon economic conditions, changes in government regulations, tax laws, other statutes, and other incidental factors. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

	For and on behalf of the Board
	Quest Capital Markets Limited
	Mr. Sunil Kumar Sanganeria	Mr. Harish Toshniwal
Dated: 29th May, 2026	Director	Director
Place: Kolkata	DIN: 03568648	DIN: 00060722