Regency Fincorp Ltd Management Discussions

OVERVIEW:

This report is an integral part of the Boards Report and covers management perspective on economic environment, industrial scenario, business performance, opportunities, threats, risks & concern, internal control etc. during the Financial Year 2024-2025.

This section should be read in conjunction with the Companys Financial Statements, including the accompanying schedules, notes, and other relevant information provided elsewhere in this Annual Report. Further, in the preparation of financial statements no separate Accounting Treatment has been followed other than that of prescribed in the Accounting Standards.

1. Economy Review

Global Economy

The global economy in FY 2024-25 demonstrated mixed signals, with major economies witnessing moderate growth amidst persistent macroeconomic challenges. While inflationary pressures have eased compared to previous years, interest rates remained elevated in many developed markets as central banks prioritized price stability. The United States showed resilience in consumption and employment, whereas the Eurozone and parts of Asia faced slower growth due to geopolitical uncertainties and weaker external demand.

Emerging markets, particularly in Asia, continued to remain engines of growth, supported by domestic consumption, infrastructure investments, and a growing middle class. However, currency volatility, high borrowing costs, and global trade disruptions have kept investors cautious.

For India, the global economic backdrop poses both opportunities and risks. On the positive side, foreign investment flows and a stable political environment are enhancing investor confidence. However, fluctuations in global liquidity, energy prices, and cross-border capital movement could impact financial markets.

Indian Economy

Indias economy continues to demonstrate resilience and robust growth, emerging as one of the fastest-growing major economies globally. Despite global headwinds such as geopolitical tensions, inflationary pressures, and slowing demand in advanced economies, India has managed to maintain a stable macroeconomic environment supported by strong domestic consumption, government capital expenditure, and structural reforms.

In FY 2024-25, Indias GDP is projected to grow at a healthy pace, driven by key sectors such as manufacturing, infrastructure, financial services, and digital innovation. The Government of Indias continued focus on initiatives like Make in India, Digital India, Startup India, and Atmanirbhar Bharat has played a vital role in strengthening the foundation of a self-reliant and inclusive economy.

The Reserve Bank of India (RBI) has pursued a calibrated approach to monetary policy, ensuring adequate liquidity in the system while maintaining inflation within the target range. These measures have contributed to financial sector stability and improved credit flows, especially towards priority sectors.

Non-Banking Financial Companies (NBFCs) play a crucial role in Indias credit ecosystem, especially in serving underbanked and underserved segments such as MSMEs, rural borrowers, and small businesses. The economic recovery and increased credit demand have created favourable opportunities for NBFCs to expand their reach and product offerings.

2. Industry Structure and Developments:

Indias financial sector witnessed continued consolidation, regulatory strengthening, and digital transformation in FY 2024-25. Amidst a robust GDP growth trajectory of approximately 7.6%, the financial services ecosystem — particularly Non-Banking Financial Companies (NBFCs) — remained vital in bridging the credit gap for underserved sectors, including MSMEs, self-employed individuals, and lower-income households.

NBFCs have established themselves as key enablers of financial inclusion due to their customer-centric approach, lean operating models, and ability to serve niche markets. While traditional banks continued to dominate systemic lending, NBFCs have carved out a growing share in areas like vehicle finance, gold loans, personal credit, and micro-enterprise funding.

During the year, the Reserve Bank of India (RBI) operationalized the Scale- Based Regulatory (SBR) Framework for NBFCs in its full form. Under this framework, NBFCs are classified into Base Layer, Middle Layer, Upper Layer, and Top Layer, based on size, activity, and risk profile. Regency Fincorp Limited, being a Base Layer NBFC, is subject to prudential norms tailored for low-risk, non-deposit-taking entities. However, even Base Layer NBFCs are now required to adopt stronger governance standards, conduct risk assessments, and maintain robust grievance redressal systems.

The regulatory emphasis during FY 2024-25 was placed on:

• Implementation of the Fair Lending Practices Code, particularly for digital lending.

• Strengthened KYC norms and monitoring of Ultimate Beneficial Ownership (UBO).

• Disclosure and governance requirements for related party transactions and board-level evaluations.

• Oversight of outsourcing arrangements and IT system integrity.

The digital lending space continued to expand, with fintech-NBFC partnerships leveraging AI-based credit scoring, e-KYC, and API-driven loan disbursement platforms. This posed both opportunities (greater reach and efficiency) and challenges (cybersecurity and data governance risks) for traditional NBFCs.

Despite macroeconomic concerns globally, Indias NBFC sector remained stable, supported by healthy capital adequacy, improved asset quality, and regulatory oversight. Liquidity conditions improved following cautious lending strategies and proactive RBI measures. However, the rising cost of funds amid tight monetary policy did weigh on margins across the sector.

In this evolving environment, Regency Fincorp continues to focus on measured expansion, technology enablement, and compliance-first lending operations, aligned with both business goals and regulatory expectations.

The Reserve Bank of India (RBI) further deepened its supervisory oversight during the year through the full implementation of the Scale-Based Regulatory (SBR) framework, under which Regency Fincorp Limited operates as a Base Layer NBFC. The emphasis on responsible lending, risk classification, and digital compliance reshaped governance and credit practices across the industry.

3. Opportunity and Threats:

Opportunities

Our long-standing relationship with our major customers has been one of the most significant factors contributing to our growth. Our commitments to quality and customer service practices have been strong contributing factors to our robust customer relations. Over the years, we have steadily developed a robust base of customers for our products in national level.

To overcome the challenges and competition, we have taken various initiatives to reduce the operational costs, to develop new value-added products, improve the performance and quality of existing value-added products as well as to explore new markets domestically and globally.

The digitization, unparalleled expertise and an excellent corporate strategy has resulted in an unprecedented growth of the company over the years. We have an experienced and dedicated team of professionals, catering to the needs of clients, delivering products at reasonable interest rates& timely.

Some other Opportunities are as follows:

• Continued demand for secured and retail credit in Tier II/III cities.

• Growth in digital lending platforms and tech-driven underwriting models.

• Evolving regulatory clarity and frameworks under RBIs SBR guidelines.

• Potential in micro-entrepreneurial and education-linked loans.

Threats:

• Change in Policy and Regulations.

• New entrants in the market and intense competition by existing players

• Technology may become obsolete due to Innovation in Technology

• Elevated interest rates and inflation affecting credit demand.

• Increased scrutiny and compliance obligations under the SBR framework.

• Credit risk in unsecured or subprime segments due to macroeconomic sensitivity.

• Growing competition from fintechs, small finance banks, and digital NBFCs.

4. Risk Management and Concerns:

The Company has implemented a formal Risk Management Policy and constituted a Risk Management Committee (RMC) during FY 2024-25 in accordance with RBIs Scale-Based Regulatory framework.

The Committee regularly monitors key risk indicators including credit, operational, liquidity, and compliance risks. A prudent credit underwriting process and effective loan monitoring have supported portfolio quality. No significant deterioration in asset quality was observed during the year.

5. Recent Trend and Future Outlook:

NBFCs have become important constituents of the financial sector and have been recording higher credit growth than scheduled commercial banks (SCBs) over the past few years. NBFCs are leveraging their superior understanding of regional dynamics and customized products and services to expedite financial inclusion in India. Lower transaction costs, quick decision making, customer orientation and prompt service standards have typically differentiated NBFCs from banks. Considering the reach and expanse of NBFCs, they are well-suited to bridge the financing gap in a large country like India. NBFCs have demonstrated agility, innovation, and frugality to provide formal financial services to millions of Indians.

This is an enviable track record despite the business models of the NBFCs being severely tested by four large external events in the last few years, namely, (i) demonetization, (ii) GST implementation, (iii) failure of few large

NBFCs, and (iv) the pandemic. The fact that many NBFCs have managed to overcome these stresses without significant impact on financial position is a testimony to their resilience and agility.

Financial institutions play a crucial role in ensuring economic stability for households and businesses at critical junctures. The pivotal role of NBFCs in driving sustainable fiscal growth is well recognized, given their last-mile connectivity and agile system. The sector has played a decisive role in accelerating last-mile funding and understanding the credit requirement of the Unbanked and Underserved. Aided by the governments thrust towards a digital economy, the sector has also undertaken significant digital transformation and invested heavily to become tech-agile institutions offering personalized products and services, ensuring faster credit disbursement.

As India strategizes post-pandemic economic recovery through fiscal measures and businesses aim to expand capacities, NBFCs have an enormous opportunity to assist in achieving the noble goal of Aatmanirbhar Bharat through the fast-tracked flow of credit to businesses and households. As the latest data on Udyam Portal shows, a significant proportion of registered businesses are micro businesses, Union budget 2023-24 offers an opportunity to bring in a targeted scheme for expanding credit to micro businesses.

We believe that NBFCs with superior capital adequacy, better margins, frugal cost management, prudent risk management and those incorporating above four key cornerstones in their business models will continue to deliver sustainable growth in the foreseeable future.

Market Size and Growth Projections:

The Non-Banking Financial Company (NBFC) sector in India has witnessed substantial growth in recent years, emerging as a critical pillar in the countrys financial ecosystem. According to estimates by various industry reports and RBI data:

• The Indian NBFC sector is projected to grow at a CAGR of 9-11% over the next 3-5 years.

• As of FY24, the NBFC credit book size is estimated to be over Rs35 lakh crore, with expectations to cross Rs50 lakh crore by FY27, driven by rising demand in retail lending, MSME financing, gold loans, and personal loans.

• NBFCs are expected to continue playing a complementary role to banks, especially in Tier 2, Tier 3 cities and semi-urban/rural areas, where financial inclusion remains a key agenda.

• Growth is being fueled by increasing digital adoption, data analytics-based underwriting, and co-lending partnerships with banks and fintechs.

In the post-pandemic recovery phase, regulatory support from the RBI, growing formalization of the economy and demand for credit across underserved sectors have created new opportunities for agile NBFCs.

Our Company is well-positioned to capitalize on this sectoral growth, with a focus on secured lending, MSME finance, and technology-enabled credit delivery mechanisms

Internal Control Systems and their Adequacy:

The Company maintains a well-documented internal control system aligned with its scale and complexity. The Internal Auditor reviews operations and reports directly to the Audit Committee. No material weaknesses were observed during the year. Compliance with statutory and regulatory requirements was regularly monitored.

6. Financial Performance with respect to operational performance:

During the financial year 2024-25, the Company achieved the following financial results:

Financial Results	Amount (In Lakh)
1 Total In come	2,166.43
2 Profit After tax (PAT)	497.57
3 Net Worth	12,183.71
4 Earning Per Share (EPS)	0.78

The Companys capital structure strengthened following preferential allotments and warrant conversions during the year, enabling business expansion and balance sheet growth. A detailed financial analysis is provided in the Directors Report and audited financial statements.

7. Material developments in Human Resources/Industrial Relations front, including the number of people employed:

The Company has undertaken employees development initiatives, which have very positive impact on the morale and team spirit of the employees. The company has continued to give special attention to human resources and overall development.

8. Details of Significant Changes in Key Financial Ratios:

Particulars	FY 2024-25	FY 2023-24	% change
Debtors Turnover	Nl L	NIL	NIL
Inventory Turn over	Nl L	NIL	NIL
Interest Coverage Ratio	1.84	1.29	42.8%
Current Ratio	2.25	1.84	22.06%
Debt Equity Ratio	0 .40	1.02	60.32%
Operating Profit Ma rgin	38.22	21.65	76.55%
Net Profit Margin	24.93	12.88	93.63%
Return on Net Worth	4.08	3.89	5.03%

9. Cautionary Statement:

Statement in this Management Discussion and Analysis Report, Describing the Companys objectives, estimates and expectations may constitute Forward Looking Statements within the meaning of applicable laws or regulations. Actual results might differ materially from those either expressed or implied.