Sarvottam Finvest Ltd Management Discussions

The Management Discussion and Analysis Report has to be read in conjunction with the Companys financial statements, covering overall performance and outlook of its activities which read as follows:

MACRO-ECONOMICVIEW

The global economy exhibited uneven yet steady growth across regions in 2024. Cyclical imbalances from post covid resurgence in 2022 and 2023, eased since the beginning of 2024, leading to a better alignment of economic activity with potential output in major economies. This adjustment also brought inflation rates across countries closer to target levels and contributed to lower global inflation. Moreover, despite a sharp and synchronised tightening of monetary policy around the world, the global economy remained unusually resilient throughout the disinflationary process, avoiding a global recession. While the global decline in inflation was a major milestone in 2024, downside risks to global growth started to emerge towards the end of the year and now dominate the outlook for 2025. Heightened uncertainties surrounding tariffs outcomes, following the US election verdict in Nov24, and its repercussion on global trade shroud the prospects of global economy. Economic policy uncertainty has increased sharply, especially on the trade and fiscal fronts and various risks viz; escalation in regional conflicts, monetary policy remaining tight for too long, possible resurgence of financial market volatility and the continued ratcheting up of protectionist policies dominate business sentiments across the globe.

During H1-FY25, growth in real GDP (Gross Domestic Product) turned out to be much lower than anticipated, largely due to lower government spending and extreme heatwave conditions. In Q2-FY25, real GDP growth slowed to a seven quarter low of 5.6%, led mainly by a substantial deceleration in industrial growth due to subdued performance of manufacturing companies, contraction in mining activity and lower electricity demand. In the subsequent quarter, however, growth in real GDP recovered to 6.2% supported by robust ruraldemand and increased government expenditure.

The second advance estimate of the National Statistical Office puts Indias real GDP growth at 6.5% for FY25 (compared to 9.2% in FY24), reflecting strong recovery in H2-FY25. On the demand side, private consumption expenditure is estimated to grow by 7.6% in FY25 driven by a rebound in rural demand and pick up in government expenditure in H2-FY25. While rural consumption demand remained resilient, considerable slack in urban demand was observed due to factors such as high interest rates, elevated food inflation, subdued growth in inflation-adjusted salary levels, elevated unemployment levels and preemptive regulation-induced slowdown in retail credit growth. On the supply side, real GVA (Gross Value Added) is estimated to grow by 6.4% in FY25 (vs. 8.6% in FY24), mainly driven by strong recovery in the agriculture & allied sector and resilient services sector while growth in industrial sector moderated.

Retail inflation based on the Consumer Price Index (CPI) peaked at 6.21% in Oct24 and softened in subsequent months to reach 3.34% in Mar25 as food price pressures softened. The contribution of food inflation to headline CPI has significantly risen over the past three years, from 34% in FY22 to 46% in FY23 to 59% in FY24 and 65% in FY25, reflecting grim repercussion of climate risks. For instance, the percentage of heatwave days in India rose to 18% in 2022-2024 vs 5% in 2020-2022 which affected crop yields. Core inflation continues to remain below 4% despite significant uptick from its record-low levels of 3.12% in the month of May24.

On the fiscal front, the Central Government reaffirmed its commitment to fiscal discipline by achieving better-than-budgeted fiscal deficit to GDP ratio of 4.8% for FY25 mainly due to lower than budgeted capital expenditure. The quality of public expenditure, however, continued improve in FY25 as growth in capital expenditure (7.3%) outpaced growth in revenue expenditure (5.8%). The market borrowings in FY25 (both gross and net) was lower than the previous year which helped narrowing public debt to GDP ratio by 160 bps to 57.1% in FY25. Indian rupee, following a stable H1-FY25, depreciated by 2.3% in H2-FY25 due to strengthening of dollar vis-a-vis other currencies. Moreover, foreign capital outflows (due to tariff-tantrum induced global trade uncertainty and lower-than-expected quarterly earnings performance by domestic corporates) exacerbated the pressure on Indian rupee. RBIs intervention to curb the excess volatility in rupee dollar exchange rate led to depletion in foreign exchange reserves by about US $ 40 billion in H2-FY25 (in contrast to accretion of US $ 60 billion in H1-FY25). Nevertheless, Indias foreign currency reserves continue to remain adequate as reflected in the comfortable import cover ratio of about 11 months.

INDUSTRYVIEW

The International Monetary Fund (IMF) projects global economy to grow at 2.8% in CY2025, significantly lower than the historical (2000- 19) average of 3.7%, largely due to increasing trade tensions and surge in policy uncertainty. Weaker global economic growth could lead to slowdown in global trade, investment, and overall economic activity, potentially impacting business sentiments, employment conditions and consumer spending. With growth varying across economies and last-mile disinflation proving sticky, global central banks are likely to take varying paths of monetary policy.

The global trade outlook for CY25 remains uncertain, despite global trade volume registering 3.7% on year growth in 2024. Escalating trade tensions and a heightened wave of uncertainty around the scope and intensity of tariffs will test the resilience of the global economy. Persistent policy uncertainty could drive structural adjustments in global value chains and its adverse impact could affect economies beyond the US amid ongoing geopolitical realignments.

Against the backdrop of turbulent global environment, the Indian economy is expected to continue to demonstrate resilience in FY26 supported by robust sectoral performance and improving consumption trends. The RBI projects 6.5% growth in Indias real GDP in FY26 supported by strong momentum in domestic demand amid cooling food inflation, tax benefits and lower borrowing costs.

On the credit front, FY25 was a mixed picture. While lenders benefitted from improved profitability and stable asset quality, credit growth was tempered by cautious credit expansion, driven by stricter regulatory measures to prevent overheating in certain lending segments.Credit uptake among new-to-credit consumers and towards consumption-led credit products witnessed a sharp decline in loan originations as regulatory forbearance turned cautious in the first half of the year. Towards the end of the year however, much of the caution has started to fade as economic impulses are getting stronger.

Indias financial system remains stable and prepared for potential global challenges in Fiscal Year 2025 2026. RBIs Financial StabilityReport 2.8%, respectively which suggests a benign outlook for food inflation. Moreover, according to the IMD (India Meteorological Department), south-west monsoon is expected to be above-normal in 2025 which will support reigning in inflation. Upside risk to inflation, however, could emanate from global uncertainties leading to pressure on Rupee and imported inflation.

Overall, the NBFC sector remained healthy with sizable capital buffers (CRAR stood at 26.1% in September, 2024), robust interest margins and earnings (NIM at 5.1% and RoA at 2.9%) and improving asset quality (GNPA at 3.4%). The RBIs policy measures in Q4-FY25 suggest a more balanced regulatory approach, fostering growth while ensuring compliance. Furthermore, RBIs commitment to maintain sufficient systemic liquidity could expedite transmission of policy rate cuts and help the NBFC sector to reduce their overall cost of funds.

FINANCIALPERFORMANCE-OVERVIEW

Sarvottam Finvest Limited ("The Company") is a registered Non-Banking Financial Company (NBFC). The performance of the Company is discussed in the Directors Report. The Company is listed on Calcutta Stock Exchange Limited and Bombay Stock Exchange. The financial statements of the Company are prepared in compliance with applicable provision of the Companies Act, 2013 and applicable Indian Accounting Standards. The Company has earned income from financing, providing loans and advances trading of securities,interest and dividend. The Company will extend the business further through identification of promising investment opportunities, through leveraging its resources. Company is also looking forward to expand its operations in the other fields permitted by the regulator, in conformity with its present status. The Company is engaged in the businesses permitted for Non-Banking Financial Company and offered a wide range of fund based financial services to its customers. Nearly 100 percent of the operating profits were contributed by core businesses viz., lending, trading in securities and investments.

DISCLOSURE OF ACCOUNTING TREATMENT

The Company has followed the Standards of Accounting specified under Section 133 of the Act, read with Indian Accounting Standard (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time and notified under Section 133 in preparation of its financial statements.

There was no change in the accounting treatment during the year.

CAPABILITIES AND STRATEGY

Indias financial services sector comprises of commercial banks/co-operative banks, non-banking financial companies, insurance companies, pension / mutual funds and other various entities. India is expected to be fourth largest private wealth market globally by 2028. The NBFC sector plays important role in financial inclusion by meeting credit needs of retail and MSME sector. The NBFC sector provides efficient credit distribution reach to untapped and under-penetrated regions and customer class. It brings the much-needed diversity to the financial sector by providing consumer credit, including automobile finance, home finance and consumer durable products finance, wholesale finance products such as bills discounting forms all and medium companies and fee based services such as investment banking and under writing. NBFCs have carved niche business areas for them within the financial sector space and are also popular for providing customized products. Few NBFCs have upheld their position in this market. However, intense competition, dynamic environment, compliance framework and stricter regulations are forcing companies to change its framework. The Company is helping enterprises to rationalize and making business operationally efficient and remain cost competitive in market. The Company is in process of creating a separate niche in market. The Companys strategy for long term profitable growth is based on continuous scaling and updated to its core businesses, while investing in new customers, services, markets and industries. The Companys strategy of strengthening the current business and investing in future revolves around: 1. Customer centricity.

2. Proximity to clients location. 3. Transparent communication. 4. Flexible control systems

OPPORTUNITY AND THREATS

Non-Banking Financial Companies ("NBFCs") remain one of the most important pillars for ushering financial inclusion in India, reaching out to a hitherto under/unserved populace and in the process leading to "formalization" of the credit demand. The NBFCs cater to the needs of both the retail as well as commercial sectors and, at times, have been able to develop strong niches with their specialized credit delivery models that even larger players including banks, have found hard to match. This has further provided a fillip to employment generation and wealth creation and in the process, bringing in the benefits of economic progress to the weaker sections of the society.

RISKS AND CONCERNS

The Company aims to operate within an effective risk management framework to actively manage all the material risks faced by the organization and make it resilient to shocks in a rapidly changing environment. It aims to establish consistent approach in management of risks and strives to reach the efficient frontier of risk and return for the organization and its shareholders. Broad categories of risk faced by the Company are Credit Risk, Market Risk, Operational Risk, Fraud Risk, Compliance Risk, Cyber Security and Reputation Risk. The risk management policies are well defined for various risk categories supplemented by periodic monitoring through the sub committees of the Board (i)The Company reviews its risk factors annually in order to keep it aligned with the changing global risks.

(ii) The Company manages such risks by maintaining a conservative financial profile and following prudent business andrisk management practices.

(iii) The company is operating on a well-defined plan and strategy; hence we are equipped to face any change inregulatory risk. (iv) The risk appetite is enunciated by the Board from time to time.

COMPLIANCE

We have a robust risk management framework covering all elements of risk management which is aligned to RBI requirements and also other international best practices. The company regularly monitors the changes in legislation pertaining to employment, labour and immigration laws across the globe to ensure total compliance assisted by regular audits. The key areas where the Company needs to introduce new policies or modify the existing policies to remain compliant are identified and acted upon. The Company has complied with all the regulations and guidelines of RBI applicable to a Non-Banking Finance Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate internal control system commensurate with its size and nature of business. Conforming to the requirements of the regulatory authorities such as the RBI and the SEBI and consistent with the requirements of the Listing agreements with the Stock Exchanges, the company has institutionalized an elaborate system of control processes designed to provide a high degree of assuranceregarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, reliability of financial controls andcompliance with applicable laws and regulations. These systems are designed in a manner to provide reasonable assurance about theintegrity and reliability of the financial statements. The Internal Auditors are mandated to carry out periodical audit and report on areas of non- compliances/weaknesses. Corrective actions in case of reported deficiencies, if any, are taken actively to further strengthen the internal control systems. These reports are reviewed by the Audit Committee of the Board of Directors for follow-up action and instructions are issued for taking necessary measures. The Companys present business operations are preponderantly that of a Loan Company, future of which largely depends upon financial and capital markets. The Company has exposure in financially sound entities. The management is optimistic about the future outlook of the Company. Further, more promising areas of activity are being explored on a sustained basis. The Company will expand its activities, consistent with its status as a Non-Banking Finance Company.

HUMAN RESOURCES

The Company firmly believes that intellectual capital and human resources is the backbone of the Companys success. The Companyalways treats human resources as its most valuable assets and continuously evolves policies and process to attract and retain its substantial pool of managerial resources through friendly work environment. The Company has always aimed to create a work place where every person can achieve his optimum potential. In view of this, the Company encourages its people to balance their professional and personal responsibilities leading to a more productive tenure of its employees. The Company lays great emphasis on building a motivated work force, which can participate constructively in the growth of the Company.

CAUTIONARY STATEMENT

The statement in the Managements Discussion and Analysis Report detailing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. These statements being based on certain assumptions and expectation of future events, actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include changes in Government regulations and tax regime, economic developments within India and abroad, financial markets etc. The Company assumes noresponsibility in respect of forward-looking statements that may be revised or modified in future on the basis of subsequent developments, information or events. The management of the Company has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements reflect true and fair picture, the state of affairs and profit/loss for the year. The following discussions on our financial condition and result of operations should be read together with our audited financial statements and the notes to these statements included in the Annual Report.