Savani Financials Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS REPORT</dhhead>

1. Economic and Industry Overview

India’s economy continues to demonstrate resilience, with strong domestic demand, government push for infrastructure development, and a structural shift towards nancial inclusion. The Non-Banking Financial Company (NBFC) sector plays a pivotal role in bridging credit access gaps, particularly in Tier 2 and Tier 3 towns and underserved borrower segments.

NBFCs accounted for nearly one- fth of total credit ow in Financial Year 2025, driven by strong retail demand, MSME nancing, and the rapid adoption of green and sustainable lending products. Policy initiatives by the Government of India and the Reserve Bank of India (RBI) have further reinforced the sector’s stability, emphasising governance, asset-liability management (ALM), and compliance frameworks.

Within this backdrop, green nancing, small business lending, and vehicle nancing (especially electric mobility) have emerged as high-growth areas. This aligns with the Company’s strategy of being a di erentiated NBFC, focusing on secured lending, EV transition nancing, and ESG-linked credit products.

2. Opportunities and Threats

Opportunities

EV Financing: Growing demand for passenger and cargo 3-wheelers, along with the retrofit and swappable battery ecosystem, presents a multi-year lending opportunity.

Small Business Loans (SBL): Tier 2/3 enterprises remain underserved by banks, creating strong potential for secured lending and working capital solutions.

Nano and Livelihood Loans: Expanding access to credit for women and micro-entrepreneurs enhances both business growth and social impact.

ESG Alignment: Carbon credit potential in EV adoption and financing of green supply chains creates additional non-interest income streams. Threats

Rising interest rate cycles are impacting borrowing costs and credit demand.

Intense competition from banks and large NBFCs in the SME finance and vehicle loan segments.

Regulatory tightening in areas of governance, ALM, and capital adequacy.

Credit quality deterioration risk due to over-leveraged or informal borrowers.

Operational challenges in scaling technology, compliance, and customer acquisition across semi-urban geographies.

3. Company Performance Overview

Savani Financials Limited commenced active lending operations in late September 2024, has focused on two core segments:

Small Business Loans to micro and small enterprises in emerging towns.

Loans for Electric Vehicles (3W passenger, logistics, and small 4W) for productive commercial use.

In our rst six months of operations, the Company has successfully established 15 branch o ces across strategic geographies, laying the foundation for sustained growth in the coming years. The Company also successfully completed a Rights Issue in the early Financial Year 2024-2025, strengthening its equity base to support the initial build-out of its operations and branch network. Given the short operating period, the Company has not reported pro ts for FY 2024-25, re ecting the upfront investments made towards branch setup, technology, people, and credit underwriting infrastructure. This was in line with the strategic business plan, which prioritises quality, prudent scaling, and robust risk management over rapid expansion.

4. Segment-Wise Performance

EV Loans: The Company has initiated financing for passenger and cargo 3W-EVs, as well as exploring retrofit projects (Project Revive in Mumbai and Project Lift in North India). These are expected to form a meaningful part of the loan book in Financial Year 2026.

Small Business Loans (SBL): Strong traction in Tier 2/3 towns, with secured lending models ensuring portfolio quality.

Loan Against Property (LAP): Continued demand for collateral-backed lending, with prudent risk assessment in place.

Nano Loans: Pilot programs for women and livelihood financing have been initiated, supporting credit inclusion.

5. Financial Performance Highlights (FY25)

Equity Base: Rs. 32 Crores

Debt Raised: Rs. 22 Crores (including Rs. 17 Crores raised in Financial Year 26)

Market Capitalisation: Rs. 53 Crores (as of 31^st March 2025)

Promoter Holding: 75%

Financial performance reflects cautious expansion, strong promoter backing, and a roadmap for growth through secured lending, co-lending partnerships, and BC acquisition opportunities.

6. Loan Portfolio and Asset Quality

As of 31^st March, 2025:

The total Loan Portfolio stands at Rs. 25.86 crores.

The portfolio composition is diversi ed across small business lending (35.80%) and EV nancing (64.20%).

NPA Commentary:

IFY>At this stage, it is premature to assess the full trajectory of delinquencies or asset quality. The Company remains cautious and committed to maintaining a conservative credit approach to ensure high portfolio quality.

Given the early stage of portfolio seasoning, asset quality indicators (such as Gross and Net Non-Performing Assets, GNPA and NNPA), it is premature to assess the full trajectory of delinquencies or asset quality. However, we have proactively implemented a strong credit monitoring framework, including early warning systems, collection strategies, and customer engagement models. The

Company remains cautious and committed to maintaining a conservative credit approach to ensure high portfolio quality.

7. Funding and Liquidity

The Company raised initial capital through a Rights Issue and remains adequately capitalised to meet near-term growth needs.

E orts are underway to establish institutional debt relationships, and we are in advanced discussions with several banks and nancial institutions to diversify our borrowing base during FY 2025-26.

The Company is in the process of evaluating options for raising additional equity capital to support its planned growth and expansion of lending operations. The speci c structure of the instrument whether by way of preferential allotment, rights issue, or any other equity-linked mechanism is currently under consideration. Key terms, including the pricing, rate (to be arrived at by a SEBI-approved Valuer), and other features of the proposed instrument, are being worked out and will be nalised subject to Board Approval and regulatory compliance. The proposed fundraising is intended to strengthen the Company’s capital base and enable it to leverage debt e ectively in the coming nancial year.

Liquidity management remains a key focus area, and the Company has instituted robust Asset-Liability Management (ALM) processes to ensure the timely availability of funds for business requirements and regulatory compliance.

8. Outlook

With the foundational infrastructure in place, the Company expects Financial Year 2025-2026 to mark a phase of calibrated growth. Key priorities include:

Expanding the loan book while preserving asset quality.

Strengthening branch productivity and customer sourcing channels.

Building deeper funding relationships.

Investing in technology to enhance underwriting, collections, and customer experience.

The Company remains cautiously optimistic about the future and is committed to delivering value to all stakeholders through prudent growth and a strong governance framework.

The Company is well-positioned to scale rapidly over the next three years, driven by:

Branch expansion in Karnataka, Andhra Pradesh, Telangana and Tamil Nadu, and select metros (Mumbai, Chennai, Delhi, Hyderabad).

Strategic projects Lift and Revive, enabling leadership in EV nancing.

Supply Chain Finance initiatives in textile and green energy clusters.

Co-lending partnerships with banks to leverage balance sheet strength.

ESG-driven credit products aligned with India’s green nance agenda.

9. Internal Control Systems and Their Adequacy

The Company has instituted a comprehensive system of internal controls (commensurate with its size and complexity), designed to safeguard assets, ensure regulatory compliance, and facilitate reliable nancial reporting.

A structured Internal Audit framework, branch-level monitoring, and compliance reporting ensure e ectiveness. The Audit Committee of the Board reviews controls periodically, ensuring that risks are identi ed and mitigated promptly.

These controls are reviewed periodically by internal auditors, and corrective action is taken wherever required.

10. Human Resources / People Development

Mantra Capital recognises that people and culture are its strongest assets. During FY25, the Company: Expanded its branch operations team across Karnataka and Andhra Pradesh.

Introduced structured increments and performance appraisal policies (9-month tenure-based increments, designation revisions). Invested in training modules and is preparing localised language manuals for new joiners. Focused on building a values-driven culture emphasising transparency, inclusivity, and customer centricity.

As the Company scales, emphasis on leadership development, operational excellence, and mindful evaluation programs will continue to shape the organisational ethos.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Company’s objectives, projections, estimates, expectations, or predictions may be “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results could di er materially from those expressed or implied due to risks, uncertainties, and external factors.