S I Capital & Financial Services Ltd Management Discussions

S.I.Capital & Financial Services Limited ("SI Capital"/ "the Company") is a Non Deposit Taking Non-Systemically Important Non-Banking Financial Company registered with Reserve Bank of India (RBI). It is an Associate Company of Sharewealth Securities Limited. SI Capital also possesses license to carry on the business of Full-Fledged Money Changer. The Company has a diversified lending portfolio covering the retail and commercial customers.

ECONOMIC OVERVIEW

Global

Global GDP growth expanded by 3.3% in 2024, marking only a modest improvement. This growth was driven by resilient consumer spending and a rebound in international trade, which increased by 3.8%.

Advanced economies like the United States recorded 2.8% GDP growth, supported by strong domestic demand and a robust labour market. The Euro Area showed weak growth of 0.9%, struggling with high energy prices and low external demand. Japan experienced minimal growth of 0.1%, facing similar challenges as the Euro Area.

Among emerging and developing economies, China’s GDP grew by 5.0%, supported by fiscal stimulus and increased manufacturing investment, despite ongoing weakness in the property sector. India continued its strong growth momentum and is set to become the world’s fourth-largest economy, overtaking Japan.

Global inflation declined from 6.8% in 2023 to 5.7% in 2024, driven by easing supply constraints and the impact of tight monetary policies. In response to moderating inflation and concerns over high financing costs, major central banks including the Federal Reserve, European Central Bank (ECB), and Bank of England (BoE) initiated monetary easing measures.

However, trade tensions and geopolitical risks remain significant threats to sustained global growth.

India

Compared to global peers, the Indian economy has exhibited strong resilience amidst global uncertainty and has emerged as one of the fastest-growing major economies in the world. GDP growth is estimated at 6.5% for FY 2024 25, although this is lower than the 9.2% growth recorded in FY 2023 24. The slowdown reflects several domestic challenges.

The key drivers of growth include an expanding services sector, increased infrastructure spending, and the governments focus on digital transformation, financial inclusion, and ease of doing business. Additionally, trade diversification and the signing of new Free Trade Agreements (FTAs) have helped reduce external risks. Rising urbanisation and a growing middle class have also boosted consumer spending and contributed to economic growth.

However, major challenges hindering growth include a sluggish manufacturing sector, persistent food inflation, subdued urban demand, a widening trade deficit, and a decline in private investment activity.

Inflation remained a concern due to global supply chain disruptions and volatile commodity prices. Consumer Price Index (CPI) inflation stood at 5.4% in FY 2023 24, declined to 4.9% in FY 2024 25, and is projected to fall further to 4.0% in FY 2025 26.

In response, the Reserve Bank of India (RBI), through its Monetary Policy Committee (MPC), cut the repo rate twice by 25 basis points each, reducing it from 6.5% to 6% as of April 9, 2025, while maintaining an accommodative stance to support economic growth.

The Indian Financial Services Industry is growing rapidly. Banks, NBFCs, insurance companies, asset management firms, and fintechs form the core of the Indian economy. The sector is undergoing a major transformation, driven by technological advancements, regulatory reforms, and changing consumer behaviour.

Despite global economic challenges and monetary tightening in advanced economies, the Indian financial sector has remained resilient, supported by strong domestic demand, a well-capitalised banking system, and proactive fiscal policies.

However, overall bank credit growth slowed to 11%, down from 20.2% in FY 2023 24.

NBFC Industry

Non-Banking Financial Companies (NBFCs) have become integral to India’s financial ecosystem, particularly in serving underserved segments. As of December 2024, the total outstanding credit by NBFCs stood at 52 lakh core, and this figure is projected to surpass 60 lakh core by FY 2025 26.

Retail lending including housing, vehicle, and consumer durable loans constitutes 58% of total loans. Fintech partnerships and mobile-first platforms have enabled NBFCs to penetrate unbanked regions. The adoption of Aadhaar-based e-KYC, UPI-enabled payments, and digital loan origination and disbursal mechanisms has further fuelled this growth.

Credit growth was recorded at 17% in both FY 2022 23 and FY 2023 24. It is expected to moderate to 13 15% in FY 2024 25 and FY 2025 26. This moderation is not indicative of weakness, but rather reflects sectorial maturity and a shift toward better risk management.

Emerging Focus Areas: Electric Vehicle (EV) financing and affordable housing are expected to be key growth areas in the near future.

The RBI has introduced several regulatory and funding reforms to support NBFCs:

Relaxation of risk-weight norms for bank lending to NBFCs, Increased bank funding into the sector, A shift toward long-term borrowings over short-term instruments, Stricter asset classification norms and Closer alignment with scheduled commercial banks’ regulatory frameworks These measures aim to improve transparency, reduce systemic risk, and ensure a level playing field.

NBFCs continue to play a critical role in advancing financial inclusion by lending to SMEs, first-time borrowers, and rural entrepreneurs. The sector is projected to grow at a CAGR of 14 16% over the next three years.

Gold Loan Industry: A Growing Opportunity

The gold loan industry has a market size of 19.2 lakh core, with 37% in the organized sector and 63% in the unorganized sector. Indian households hold approximately 27,000 tonnes of gold about 14% of the global gold supply. However, gold loan penetration remains low at just 5.6%, highlighting significant untapped potential.

RBI’s increased oversight is strengthening borrower protection and lender credibility. Innovations such as doorstep gold appraisal and mobile-based loan disbursal are driving further adoption.

Southern India dominates the gold loan market, accounting for 79% of total outstanding gold loans.

Vehicle Financing: Catalysing Automotive Growth

Vehicle financing continues to play a pivotal role in the Indian automobile industry, influencing both consumer purchasing decisions and market dynamics. Improved credit availability and favourable interest rates have expanded access to vehicle loans. Financing options have significantly contributed to the growth of vehicle sales across all segments. Affordable loan schemes have made vehicle ownership more attainable, particularly in semi-urban and rural areas.

Outlook:

The vehicle financing sector is poised for substantial growth, driven by rising vehicle prices, increasing aspirations for ownership, and greater credit penetration in under banked regions. Financial institutions including banks, NBFCs, and fintech firms are expected to expand their reach through digital platforms, offering tailored financing solutions with faster disbursements.

The shift toward digital lending and AI-driven credit assessments is improving approval timelines and reducing default risks, thereby enabling credit access for first-time buyers, especially in Tier 2 and Tier 3 cities.

Additionally, rising disposable incomes, improved credit ratings, and a supportive regulatory framework from the RBI are anticipated to further accelerate growth in the vehicle financing sector, contributing to the broader expansion of the automotive industry.

THE COMPANY BUSINESS OVERVIEW & OUTLOOK

S.I. Capital is a base layer Non-Deposit-Taking NBFC and a Full-Fledged Money Changer. The companys focus is on extending credit to unbanked sectors of the economy.

Our core business areas include Gold Loans, Vehicle Loans, Business Loans, and Forex. The company’s disbursements stood at 1,129.32 lakhs during the year under review, marking an increase of 24.14%. Overall, the Profit and Loss grew by 124.15% compared to the previous financial year.

The NPA remains under control at 5.61% for FY 2024 25. Interest income grew by 54.69%, reflecting improved market conditions and the focused efforts of the company.

Compared to the previous financial year:

Gold Loans increased by 28.29%.

Personal and Business Loans decreased by 29.56%, due to the discontinuation of personal loans and the tightening of credit norms for business loans. This strategic shift was aimed at managing our unsecured portfolio.

As a result, we redirected our focus to Vehicle Loans, which grew significantly by 216.81%.

However, income from the forex business recorded a decline of 46.18%.

Our next major plan is to increase our Net Owned Fund (NOF) and to double our business volume in the upcoming financial year.

RISK MANAGEMENT

As an NBFC, SI Capital is exposed to liquidity, credit, interest, and market risk. The Company has a strong risk management policy and will continue to invest in processes to build advanced risk management. A strong governance framework ensures that the Board of Directors and its committees approve risk strategies and delegate credit authorities. Risk assessment of customers is made at the time of initial appraisal for pricing and granting loans.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

Company’s relation with employees & Industrial Relations remained cordial during the year under review, and no material developments occurred during that period. 15 employees were on the payrolls of the Company as on 31^st March 2025.

SWOT ANALYSIS

Well-established brand image, Well-defined management structure

Strengths

Consistent growth over the last three quarters Weakness Fund liquidity /high finance cost

Opportunity Untapped market potential, continuing opportunities in unbanked sectors Weaknesses Limited fund liquidity, High cost of financing

INTERNAL CONTROL SYSTEM

The Company’s internal control system is properly placed and strengthened taking into account the nature of business and size of operations. Internal auditors conduct periodic audits and bring out any deviations in internal audit procedures and their observations are periodically reviewed and compliance is ensured. The audit committee is properly reviewing and monitoring this internal audit process.

KEY FINANCIAL RATIOS

Particulars	As on 31-03-2025	As on 31-03-2024	Explanation
Current Ratio	2.99	3.89	The company maintains a robust current ratio of 2.99 and 3.89, indicating strong short-term liquidity. Despite an increase in sundry creditors, the ratio remains significantly above 1, reflecting efficient working capital management and a solid financial position.
Interest Coverage Ratio	0.23	-2.44	The outstanding debentures decreased from 427 Lakhs in FY 2023 24 to 400 Lakhs in FY 2024 25. During this period, the Inter-Corporate Deposits (ICDs) remained stable. This reduction in debentures led to a lower interest liability due to the redemption of Non-Convertible Debentures (NCDs). Furthermore, the loan portfolio grew from 909.77 Lakhs to 1129.32 Lakhs, contributing to a healthy profit of 17.24 Lakhs.
Debt Equity Ratio	1.41	2.30	The debenture liability has been reduced by 27 lakhs, while the ICD liability of 25 lakhs has remained unchanged over the past two years. Additionally, the profit for the current financial year has been added to equity, increasing its value. As a result, the debt- equity ratio has improved significantly, decreasing from 2.30 to 1.41, reflecting a stronger financial position.
Operating Profit Margin (%)	35.75	-70.11	The loan portfolio grew significantly from 909.77 lakhs to 1,129.32 lakhs, generating a profit of 17.24 lakhs. This robust growth, combined with the timely recovery of EMIs and enhanced interest collections, contributed to a substantial improvement in the operating profit margin from a negative 70.11% to a positive 35.75%. This marked turnaround underscores the company’s strengthened financial performance, operational efficiency, and effective management of costs, positioning it well for sustained profitability.
Net Profit Margin (%)	6.74	-41.43	Despite the reported decline in net profit margin during FY 2024 25, the company achieved robust top- line growth, with total income rising significantly by approximately 48.26% from 176.53 crore in FY 2023 24 to 261.72 crore in FY 2024 25. This remarkable increase underscores the company’s strong operational momentum and expansion initiatives, laying a solid foundation for long-term profitability improvements.
Return on Net worth	0.03	-0.24	The Return on Net Worth has improved significantly compared to the previous year, primarily due to a notable increase in operating profit. This enhancement in profitability has led to a positive return, reflecting improved financial performance and more efficient utilization of shareholders funds.

Information as required by the provisions of Section 197 of the Companies Act, 2013, read with Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, is given under: (Top 10 employees based on Annual Salary

Sl.No Name of Employee	Total remuneration drawn 2024-25(Amount in Rs.)
1 AJEESH K A	6,60,000.00
2 SUJITH K RAVINDRANATH	6,00,000.00
3 SUBIN C B	4,44,000.00
4 VIMAL JOSEPH	3,49,200.00
5 NEETHU K J	2,71,200.00
6 VAISAKH C	2,52,000.00
7 DAYANANDAN M	2,49,166.00
8 RANI SANTHOSH	2,28,000.00
9 LITTA SAJI	2,16,000.00
10 SHALINI	2,04,000.00