Rikhav Securities Ltd Management Discussions

The securities industry continued to operate within an evolving regulatory framework during FY25 and FY26, with SEBIs initiatives largely centred on investor protection, risk management, market integrity and technology-enabled access.

One of the most significant developments concerned equity derivatives. SEBI rationalised weekly index derivative contracts, increased minimum contract sizes, strengthened expiry-day risk management and required upfront collection of option premiums. These measures were aimed at reducing excessive speculative activity and improving risk controls.

A second major development was the framework for retail algorithmic trading. SEBIs February 2025 circular sought to bring greater oversight to API-based algorithmic strategies used by retail investors. The implementation process continued through FY26, requiring brokers to register relevant products and strategies, participate in testing and establish appropriate systems.

The SME IPO framework was also strengthened. SEBI reviewed eligibility requirements, disclosure standards, offer structures and governance requirements with the objective of improving issue quality and investor protection. Among the changes highlighted by SEBI were profitability- related eligibility criteria and tighter limits on Offer for Sale components.

Within Margin Trading Facility, SEBI continued to refine operational requirements. Measures included changes relating to collateral and margin treatment and relaxation in the timeline for submission of net-worth certificates by brokers offering MTF. The subsequent review initiated in June 2026 demonstrates the regulators continued focus on the rapid expansion of leveraged equity financing.

Investor protection remains central to the regulatory framework. Brokers are required to comply with KYC, margin, segregation of client funds and securities, grievance- redressal and risk-management requirements. Exchange-

level grievance mechanisms, SEBIs SCORES platform and online dispute-resolution systems provide additional investor-protection mechanisms.

For the broking industry, increasing regulation creates additional compliance and technology costs, but it also strengthens market credibility. Over the longer term, transparent regulations, stronger investor safeguards and robust market infrastructure are important for sustaining public confidence and encouraging broader participation.

A strong regulatory framework is essential for the longterm development of Indias capital markets. While regulatory changes may require operational and technology enhancements, they also promote greater transparency, strengthen investor confidence and improve market integrity. We remain committed to maintaining the highest standards of governance, compliance and risk management while proactively adapting to the evolving regulatory landscape.

Indias long-term economic expansion remains a fundamental growth driver for capital markets. Rising incomes, expanding businesses and growing corporate investment increase the requirement for financial intermediation and create opportunities for companies to access equity capital. As the listed corporate universe expands, the ecosystem supporting trading, custody, distribution and market making also grows.

A second structural driver is the financialisation of household savings. Mutual fund AUM of Rs. 73.73 lakh Cr , 27.39 Cr mutual fund folios and monthly SIP contributions exceeding Rs. 32,000 Cr by March 2026 demonstrate the increasing acceptance of market-linked financial products among Indian households.

The rapid increase in demat penetration provides another long-term opportunity. Indias demat account base has multiplied over the past several years, significantly expanding the addressable investor population for brokers, depository participants and investment-product distributors.

Technology is accelerating this process. Affordable smartphones, internet connectivity, digital payments and electronic KYC have reduced the geographical and operational barriers to securities-market participation. Brokers can increasingly acquire and service clients across India through digital channels, allowing business models to scale without equivalent growth in branch networks.

Indias demographic profile also supports the industrys development. Younger investors are generally more comfortable with mobile applications and digital financial products, while increasing access to financial education and online information is encouraging participation outside traditional metropolitan markets.

Finally, the continued development of the primary and SME capital markets is broadening the listed-company ecosystem. As more enterprises use equity markets to raise capital,

Indias expanding investor base creates substantial opportunities for securities intermediaries. Growing demat penetration provides brokers with a larger addressable market, while digital onboarding makes nationwide client acquisition increasingly viable.

The continued financialisation of savings creates opportunities to diversify beyond traditional brokerage. Mutual fund distribution, IPO participation, MTF, depository services and integrated investment platforms allow intermediaries to deepen client relationships and develop multiple revenue streams.

MTF represents a particularly notable emerging opportunity. The significant expansion in industry MTF exposure demonstrates demand for leveraged equity investing and provides brokers with an interest-based revenue stream. However, rapid growth must be accompanied by strong collateral monitoring, prudent funding and disciplined risk management.

The SME IPO ecosystem creates another opportunity. A growing number of smaller enterprises are accessing public markets, increasing demand for market-making and associated capital-market services. Companies with established exchange memberships and experience in SME market making may benefit from continued development of this ecosystem.

At the same time, the industry faces important challenges. Market volatility can directly influence trading volumes, proprietary trading performance and investor activity. FY26 itself demonstrated this sensitivity as cash-market turnover moderated alongside weaker benchmark-market performance.

Regulatory change is another key consideration. Measures affecting F&O contracts, algorithmic trading, margins, MTF and SME listings can materially influence volumes and business economics. Brokers therefore require flexible systems and strong compliance infrastructure.

Competition and pricing pressure remain significant. Digital- first brokers have reduced transaction costs across the industry, making technology, customer experience, product breadth and service quality increasingly important sources of differentiation.

Technology also creates operational risks. Cyberattacks, data breaches, system downtime and execution failures can have significant financial and reputational consequences. Continuous investment in cybersecurity, infrastructure resilience and automated risk-management systems is therefore essential.

Proprietary trading introduces market and liquidity risks, while MTF creates credit and collateral risks. Marketmaking operations similarly require disciplined inventory management because liquidity can decline sharply during periods of market stress. Diversification can reduce dependence on any single revenue source, but effective risk management remains critical across all business lines.

The medium-term outlook for Indias capital-markets industry remains supported by structural factors, although near-term conditions may remain volatile.

Indias expected economic expansion, rising household incomes and increasing financialisation of savings provide a favourable foundation for continued participation in financial assets. The Economic Surveys FY27 growth projection of 6.8%-7.2% indicates continued underlying economic momentum, although external conditions remain uncertain.

The expansion of the demat account base is expected to remain one of the industrys most important structural drivers. As investors from smaller cities and younger demographic groups enter the market, digital platforms should continue to play a central role in client acquisition and servicing.

Mutual fund participation also provides a strong underlying base for domestic capital formation. Record monthly SIP contributions during FY26 indicate that systematic investing is becoming embedded in household savings behaviour. This can provide greater stability to domestic institutional flows over the longer term.

Primary-market activity and the SME ecosystem should continue to create opportunities for intermediaries involved in IPO applications, distribution, depository services and market making. Stronger eligibility and disclosure standards may moderate speculative activity but can also support the long-term credibility of SME capital markets.

MTF has emerged as another meaningful industry opportunity. However, its rapid growth increases the importance of funding discipline, collateral management and regulatory oversight. Growth in this segment is therefore likely to be accompanied by greater attention to leverage-related risks.

Technology will remain central to competitive positioning. Mobile trading, digital KYC, automated execution, algorithmic tools and real-time risk management are likely to become increasingly integrated into brokerage platforms. At the same time, cybersecurity and operational resilience will require continued investment.

In the near term, capital-market activity may remain sensitive to crude oil prices, foreign portfolio flows, currency movements, corporate earnings, interest rates, geopolitical developments and regulatory changes. Derivatives volumes, in particular, could continue adjusting to SEBIs measures aimed at strengthening investor protection.

Overall, Indias securities and broking industry continues to benefit from long-term structural growth in investor participation, financialisation of savings, digital adoption and capital-market depth. Short-term trading activity will remain cyclical and sensitive to market conditions, but the expanding investor base and increasingly diversified financial ecosystem provide a supportive foundation for the industrys medium- to long-term development.

The financial year 2025-26 was marked by a challenging operating environment for the capital markets industry. Elevated market volatility, tighter liquidity conditions, and moderation in trading activity impacted overall market sentiment and business performance across the broking ecosystem. Despite these headwinds, Rikhav Securities reported Total Income of Rs. 1,991.62 Cr, EBITDA of Rs. 32.53 Cr, and Profit After Tax of Rs. 18.96 Cr during the year. Earnings Per Share (EPS) stood at Rs. 4.95.

The Companys diversified business model, spanning equity and derivatives broking, proprietary trading, market making, depository services, margin trading, and distribution of financial products, continued to provide a broad revenue base. While market conditions remained volatile throughout the year, the Company remained focused on strengthening its technology platform and enhancing operational capabilities to support long-term scalability and efficiency.

Profitability during FY26 was impacted by losses arising from share trading activities amid volatile market conditions. In addition, the Company continued to invest in strengthening its technology infrastructure through investments in computers and software, resulting in higher depreciation expenses during the year. These investments are aligned with the Companys long-term strategy of building a robust, technology-driven financial services platform capable of supporting future growth.

Further, an unrealised profit of Rs. 4.33 Cr from Securities Lending and Borrowing Mechanism (SLBM) transactions has not been recognised in the financial statements for FY26 in accordance with the applicable accounting principles and is expected to be realised in the subsequent period.

Technology remains central to the Companys strategy and serves as a key driver of client experience, execution efficiency, risk management and operational scalability. The Company continues to strengthen its digital ecosystem by investing in trading infrastructure, automated processes and secure client-facing platforms.

During FY26, the Company invested approximately Rs. 5.40 Cr in computers, software systems and technology enhancement initiatives. These investments have strengthened backend efficiency, execution capabilities and the scalability of the Companys operating platform. The technology infrastructure is supported by a low-latency trading ecosystem, automated monitoring systems and algorithm- and Value-at-Risk-based risk management tools that help reduce manual intervention and improve risk-adjusted execution.

- Rikhav Plus Platform: The Companys mobile trading platform provides clients with integrated access to equity, derivatives and commodity markets. During the year, the Company continued to upgrade its front-office systems, trading infrastructure and hardware capabilities to improve platform responsiveness, reliability and execution efficiency.

- Digital Onboarding Infrastructure: The Companys Aadhaar-enabled e-KYC platform allows individual retail clients to complete the account-opening process digitally. Nearly all eligible retail accounts are now onboarded through digital channels, while non-individual accounts continue to follow the applicable physical documentation process. The Company is further refining the digital experience before scaling its digital marketing and online client acquisition initiatives.

- Automation and Algorithmic Capabilities: The Company has strengthened its in-house technology capabilities across algorithmic trading, research automation, compliance reporting and audit-related workflows. It has also continued to invest in servers, front-office systems and supporting infrastructure required for efficient low- latency trading operations.

Future Initiatives and Strategic Roadmap

The Companys strategic roadmap is focused on building a scalable, diversified and technology-led financial services platform. Its future initiatives will be guided by disciplined capital allocation, prudent risk management and expansion across selected business verticals.

- Expansion of Institutional Business: The Company is strengthening its institutional brokerage presence through empanelment with banks, mutual funds, Foreign Portfolio Investors and other financial institutions.

During the year, it commenced relationships with Kotak Mutual Fund, Bank of India, RBL Bank and several FPIs. The establishment of a dedicated research division is expected to support further institutional empanelment and business development.

- Scaling High-Potential Verticals: The Company intends to gradually allocate capital towards brokerage services, Margin Trading Facility, proprietary trading and other capital-efficient opportunities while optimising its overall risk-return profile. It will continue to strengthen its capabilities in algorithm-driven arbitrage, delta hedging and structured short-term trading strategies.

- Expansion of Market-Making Activities: The Company has commenced exchange-traded fund market-making activities with Kotak Mutual Fund and intends to expand its presence by entering into similar arrangements with additional mutual fund houses. This will complement its existing market-making capabilities across the SME capital market ecosystem.

- Digital-First Client Acquisition: The Company plans to commence targeted digital marketing initiatives after completing further enhancements to its digital trading and onboarding platforms. Its Aadhaar-enabled e-KYC infrastructure and mobile trading platform will form the foundation for acquiring clients efficiently across geographies.

- Measured Geographic Expansion: The Company is expanding beyond its core markets of Maharashtra and Gujarat through digital channels, franchise partnerships and sub-broker networks. It has commenced operations in locations including Lucknow, Nashik and Gorakhpur and intends to add approximately 10 to 12 branches or franchise locations annually through a cautious and compliance-focused approach.

- Responsible Adoption of Artificial Intelligence: The

Company has begun evaluating AI-led applications across research, data gathering, analytics and process automation. Adoption is being undertaken in a controlled manner, with human validation and source verification remaining integral to ensure the accuracy and credibility of information generated through such systems.

10. Key Risks and Mitigation Strategies

The Company operates in a dynamic financial services environment and is exposed to risks arising from market movements, counterparty behaviour, technology systems, operational processes, cybersecurity threats and evolving regulations. Its risk management framework combines technology-driven controls, defined exposure limits, continuous monitoring and independent oversight.

Market and credit risk refers to the possibility of losses arising from adverse movements in equity, commodity, currency or interest-rate markets, as well as the potential default of clients or counterparties. These risks are particularly relevant to the Companys proprietary trading, market-making and Margin Trading Facility operations.

- Mitigation: The Company uses algorithm- and Value- at-Risk-based monitoring systems, automated margin controls, predefined exposure limits and strategy-level reviews to manage market risk. Following the volatility witnessed during FY26, the Company has reduced its exposure to long-term cash-market investments and SME inventory. It has also adopted shorter holding periods for certain market-making positions and is increasingly focusing on arbitrage and hedged strategies to reduce directional exposure.

Operational Risk

Operational risk may arise from system failures, hardware disruptions, process deficiencies, human error or external events that affect the continuity of business operations.

- Mitigation: The Company has segregated its internal trading infrastructure from client-facing networks, with its arbitrage systems operating through a restricted internal environment. Its systems are supported by secondary hardware, fail-safe mechanisms and backup infrastructure designed to restore operations in the event of a disruption. Automated reporting, compliance workflows and system monitoring further reduce manual intervention and operational vulnerabilities.

Regulatory and Compliance Risk

The financial services industry is governed by an evolving regulatory framework covering client protection, trading practices, margin requirements, cybersecurity, disclosures and market conduct. Non-compliance may result in financial penalties, operational restrictions or reputational damage.

- Mitigation: The Company maintains an independent compliance function and regularly tracks regulatory developments issued by SEBI, stock exchanges and other statutory authorities. Systems and operating processes are periodically updated to align with revised regulations. While certain regulatory changes may impact trading volumes in the short term, the Company believes that measures promoting investor protection and market discipline contribute to the long-term development of the capital markets ecosystem.

The increasing use of digital platforms exposes the Company to risks including cyberattacks, unauthorised access, data loss and disruption of client-facing services.

- Mitigation: The Company has implemented network segregation, access controls, system backups and failsafe infrastructure across its technology environment. Client-facing systems and operating-system endpoints are reviewed regularly, while third-party specialists support independent assessment of the cybersecurity framework. Backup systems are maintained outside the primary network to support timely restoration in the event of a system compromise. No cybersecurity breach or related operational disruption was reported during FY26.

The Human Resources department plays a pivotal role in fostering a productive and positive work environment. HR is responsible for attracting and retaining top talent, ensuring that the companys workforce is equipped with the skills and motivation needed to drive business success. As of 31 March, 2026, the Company had a total of XX employees. HR oversees the entire employee lifecycle, including recruitment processes, onboarding, training, and development programs. It also manages performance evaluation, employee relations, and compliance with applicable labor laws. By promoting a culture of continuous learning and professional growth, the HR department helps employees achieve their full potential, thereby contributing to overall organizational effectiveness. Furthermore, HR places emphasis on employee satisfaction and engagement through regular feedback mechanisms, wellness programs, and initiatives that foster diversity and inclusion.

The Company has established a comprehensive system of internal controls designed to ensure the reliability of financial reporting, operational efficiency, safeguarding of assets, and compliance with all applicable laws and regulations. Our internal control framework is commensurate with the size, scale, and complexity of our operations and is deeply integrated into our day-today business processes.

The control systems are built around a robust technology backbone, featuring automated checks and balances within our core platforms like ODIN and N-Prime RMS. This minimizes the scope for human error and ensures real-time monitoring of transactions and exposures.

Key components of our internal control system include clearly defined roles and responsibilities, documented policies and procedures, and a strong, independent compliance function that utilizes tools like Trackwhizz to monitor and report on regulatory adherence.

The Board of Directors, supported by the Audit Committee, holds the ultimate responsibility for the internal control framework. The committee periodically reviews the effectiveness of these controls and the findings of internal and external auditors to ensure any identified weaknesses are promptly addressed. Based on this continuous review and the operational results, the Board is of the opinion that the Companys internal control systems are robust and adequate for the current scale of our business

This Annual Report includes forward-looking statements about our objectives, estimates, and expectations. These statements, which use terms like ‘anticipate, ‘estimate, ‘expects, and similar expressions, reflect our plans and assumptions but cannot guarantee future results. Various factors, such as political and economic changes, exchange rate fluctuations, and sector specific conditions, could impact our operations. Actual outcomes may differ due to risks and uncertainties, and we do not commit to updating these statements publicly.