Rita Finance and Leasing Ltd Management Discussions

ANNEXURE -B

Your directors are pleased to present the Management Discussion and Analysis Report for the year ended 31st March, 2025.

The financial statements are prepared in accordance with the Companies Act, 2013 and Indian Accounting Standards (Ind AS), along with applicable RBI guidelines for NBFCs. Estimates and judgments have been made prudently to ensure the financials present a true and fair view of the Companys affairs. This report may include forward-looking statements involving risks such as regulatory changes, economic shifts, or strategy execution. Actual results may materially differ.

Global economic conditions remain volatile, challenged by geopolitical tensions, inflationary pressures, and strained trade relations. Amidst uncertainty, Indias resilient domestic demand and reform-driven momentum continue to stand out.

Indias economy registered a robust real GDP growth of 6.5% in FY 2024-25, retaining its position as the fastest-growing major economy. The momentum was particularly strong in Q4 with 7.4% growth, even as the full-year performance reflected moderation due to global headwinds. Inflationary pressures eased sharply, with retail CPI falling to 2.82% in May 2025?the lowest since February 2019?providing significant relief to consumers and policymakers. In response, the Reserve Bank of India pursued aggressive monetary easing, cutting policy rates and reserve requirements to bolster domestic demand and sustain the growth cycle.

Indias external position also strengthened during the year, with robust performance in foreign trade, exports, and capital inflows. Reflecting confidence in the economys resilience and policy effectiveness, S&P upgraded Indias sovereign rating to "BBB" in August 2025. Looking ahead, the RBI expects GDP growth to remain steady at 6.5% in FY 2025-26, while a parliamentary panel has underscored the need to raise the investment rate to 35% of GDP to achieve and sustain an 8% growth trajectory over the coming decade.

The Indian governments high capital spending has brought the fiscal deficit to 5.8% in FY 2023-24 and the combined debt- GDP to above pre-pandemic levels. The RBI paid a higher-than-expected dividend payout of Rs 2.1 trillion to the government, v/s the expected Rs 0.9 trillion. This is likely to lead to lower market borrowings in the second half of the year and consequently lower bond yields.

Non-Banking Financial Companies (NBFCs) witnessed stellar growth in FY 2024-25, with credit expanding by 20%, significantly outpacing the banking sectors growth of around 12%. The sectors asset base surged to ^28.2 lakh crore, supported by a 22% rise in borrowings to ^19.9 lakh crore. However, profitability trends were uneven?while sector-wide profit after tax (PAT) increased by 8%, microfinance institutions (MFIs) reported a sharp 95% plunge in profits, reflecting concentrated stress in certain borrower segments.

Looking ahead, rating agencies project moderation in growth. ICRA expects NBFC credit expansion to ease to 13-15% during FY 2025 and FY 2026. Retail lending, which has been the key growth driver, recorded a 23% CAGR in FY 2023-24 and is forecasted to grow at a healthy 16-18% in FY 2025-26. Supporting this trajectory, Crisil Intelligence highlighted that NBFCs assets under management (AUM) doubled from ^23 trillion in FY 2019 to ^48 trillion by the end of FY 2025, with a further 1517% growth projected during FY 2025-28.

NBFCs now account for 21% of systemic credit, steadily gaining market share owing to their agility, technology-driven models, and ability to serve underserved customer segments. As of March 2024, 71.2% of NBFC credit was concentrated in industry and retail sectors, with vehicle loans, gold loans, and microfinance together forming 56.7% of the retail portfolio. This diversified yet focused approach underscores the sectors growing systemic importance while highlighting areas of concentrated risk that require continued regulatory and operational vigilance.

Indias NBFC sector continued to demonstrate resilience and scale in FY 2024-25, with credit growth of 20% year-on-year? well above the banking sector. However, industry forecasts suggest moderation to 13-15% in the coming years as growth stabilizes. Asset quality showed broad improvement, though pockets of stress remain, particularly in microfinance institutions (MFIs) and unsecured retail loans. The sectors assets under management (AUM) nearly doubled over the past six years, reaching ^48 trillion by FY 2025, underscoring its expanding systemic importance.

NBFCs today account for over one-fifth of Indias total credit, steadily gaining market share due to their agility, diversified product offerings, and focus on underserved segments. Retail lending and MSME financing remain the sectors core growth drivers, supported by technology-driven models and strong last-mile connectivity. This combination has positioned NBFCs as a critical pillar in Indias financial ecosystem, bridging credit gaps while complementing the banking systems role in driving inclusive economic growth.

During the year under review, your Company, being a Non-Banking Financial Company (NBFC), continued to primarily earn income from its financing activities. The Revenue from Operations for the financial year ended March 31, 2025 stood at ^10,284.25 thousand, as compared to ^10,798.01 thousand for the previous year ended March 31, 2024. The slight decrease is mainly on account of moderation in lending operations and cautious deployment of funds in line with prudent risk management practices.

Including other income, the Total Revenue of the Company during FY 2024-25 was ^10,644.25 thousand as against ^12,711.78 thousand in FY 2023-24. Other income during the year comprised mainly of interest income and miscellaneous receipts, whereas the previous year had an additional contribution from profit on sale of fixed assets.

On the expenditure side, the Total Expenses were ^4,158.90 thousand in FY 2024-25 as compared to ^6,541.42 thousand in FY 2023-24. The reduction was primarily due to significant rationalization of other operating expenses, even though finance costs were incurred in the current year on account of borrowings mobilized to support lending operations. Employee benefit expenses also increased in line with business expansion and regulatory requirements.

As a result, the Profit before Tax (PBT) increased to ^6,485.35 thousand during the year under review as against ^6,170.36 thousand in the previous year. After providing for current tax of ^453.97 thousand, the Profit after Tax (PAT) stood at ^6,031.38 thousand in FY 2024-25, registering a healthy growth over ^4,507.07 thousand reported in FY 2023-24.

Further, after considering other comprehensive income/(loss), the Total Comprehensive Income for the year was ^6,031.38 thousand, as against ^1,590.74 thousand in FY 2023-24. The improvement in profitability demonstrates the Companys focus on strengthening its credit underwriting standards, efficient cost management, and disciplined approach to fund deployment.

Opportunities:

• Strong domestic demand, financial inclusion, and low credit penetration (~70% Credit-to-GDP) signal vast potential.

• Rapid growth in retail and MSME segments presents expanding market scope.

• Technology and customer reach provide competitive advantage for agile NBFCs.

• Upgraded sovereign rating, stable inflation, and policy reforms build favorable macro environment.

Threats:

• Tightening credit conditions or global trade tensions may dampen demand.

• Rising delinquencies in unsecured retail and microfinance could impact margins.

• Regulatory shifts and capital costs remain key risks to profitability.

The Company has adequate internal controls and standardized operating processes that are envisaged to protect assets and business efficiency. The Company has established strong and well-entrenched internal control procedures commensurate with its size and operations and relevant to its broad domain of the lending business.

The Company continues to maintain robust internal control frameworks and operational processes appropriate to its scale. These ensure asset safety, compliance, and business efficiency.

We value our workforce and foster an inclusive work culture that motivates employees and drives retention, recognizing their pivotal role in the companys success.

NBFCs will remain crucial in extending credit to underserved segments. Rita is well-positioned to benefit from expanding opportunities, provided asset quality is vigilantly monitored and digital/retail strategies are leveraged. A stable macroeconomy with manageable inflation and supportive regulatory environment augurs well for future performance.

Key ratios of Rita on a consolidated Basis:

• The Operating Profit Ratio for the year ended 31st March, 2025 stood at 36.73% as compared to 31.81% in the previous year. The improvement is primarily attributable to a reduction in overall operating expenses, particularly other administrative costs, despite incurring finance costs in the current year.

• The Return on Capital Employed (ROCE) was 17.40% in FY 2024-25 as against 19.02% in FY 2023-24. The marginal decline is due to moderation in revenue from operations and higher deployment of borrowings, even though profitability remained stable.

• The Earnings Per Share (EPS) increased to ^0.16 in FY 2024-25 from ^0.13 in FY 2023-24, reflecting an improvement in the Companys net profitability and value creation for shareholders.

This MD&A contains forward-looking statements within the meaning of securities laws. Actual outcomes may differ due to risks including economic variability, regulatory changes, asset quality shifts, and strategic execution. The Company disclaims any obligation to update these statements.