SBFC Finance Ltd Management Discussions

Overview of Global Economy:

As 2024 unfolds, the global economic landscape is characterised by a nuanced path of recovery, underscored by continuous challenges and emerging uncertainties. The aftermath of consecutive intense disruptions over the preceding four years has left the global economic and financial fabric in a state of tentative recovery. The international community continues to grapple with a spectrum of obstacles, including uneven growth patterns, heightened debt burdens, geopolitical economic divisions, and persistent global conflicts. The compounded effect of soaring interest rates and significant fiscal imbalances has escalated the strain on debt repayments across various nations, thereby complicating the formulation and execution of policy measures, particularly in essential infrastructure development and social welfare initiatives.

There is a glimmer of hope as inflation rates begin to show signs of easing, fostering a guarded optimism towards achieving a stable trajectory for the global economy. Nonetheless, the prevailing economic climate is marked by fragility, with prevalent uncertainties about growth and inflation prospects, which necessitates a careful and measured approach towards future economic forecasts and associated risks.

From a broader perspective, the World Bank acknowledges the global economys unexpected resilience in the face of consecutive shocks, suggesting a possibility for a "soft landing" that could avert severe economic downturns. Nevertheless, the intermediate outlook remains subdued, with an anticipation of a deceleration in global growth that could signify the weakest performance in decades since the 1990s. This slowdown poses a risk of exacerbating poverty levels across many developing countries.¹

The International Monetary Fund (IMF) projects a global growth rate of 3.1% for 2024, marginally improving to 3.2% in 2025, with the 2024 forecast slightly higher by 0.2 percentage points than previously estimated in October 2023. This upward adjustment is attributed to the unexpected resilience observed in the United States, various large emerging markets, and developing economies, coupled with fiscal support measures implemented in China. Despite these adjustments, the growth forecast for 2024–2025 remains below the historical average, impacted by high central bank policy rates aimed at controlling inflation, the retraction of fiscal support amid soaring debts, and stagnant productivity growth. Moreover, the IMF highlights the ongoing moderation of inflation across most regions, driven by the resolution of supply-side issues and stringent monetary policies, with global headline inflation expected to decline to 5.8% in 2024 and further to 4.4% in 2025.²

Emerging Dynamics:

The Rise of Decentralised Growth in the Global Economy

The global economic landscape is undergoing a phase of growth decentralisation, characterised by varying growth prospects across different regions and countries. According to the World Banks Global Economic Prospects report, growth patterns are not uniform, with specific regions and countries exhibiting higher growth potential than others. This trend signifies a shift from traditional growth poles to a more distributed growth scenario, where emerging markets and developing economies (EMDEs) play a significant role.

South Asia (SAR) shows promise with significant growth prospects. The region is anticipated to experience growth rates of 5.6% in 2024 and 5.9% in 2025, with India leading the way as a significant growth driver. East Asia and the Pacific (EAP) also promise growth rates of 4.5% and 4.4% in 2024 and 2025, respectively, with China facing tough competition from Indonesia in terms of percentage growth. Growth in East Asia and Pacific (EAP) is expected to be moderated by slower growth in China, which impacts regional trade dynamics. Nevertheless, certain export-oriented economies within the EAP and Latin America and the Caribbean (LAC) regions may benefit from a modest pickup in global trade in 2024.³

While Advanced Economies represented by US, EU and Japan are struggling to keep up the pace hovering around 1.5 percent, Sub-Saharan Africa (SSA) is expected to witness a rebound in growth, projected at 3.8% in 2024 and 4.1% in 2025. This improvement is attributed to easing factors that previously hindered growth, such as reduced fiscal support and adjustments in metal-exporting economies to lower prices.⁴

The decentralised nature of global growth highlights the increasing significance of EMDEs in driving the world economy. Factors such as investment trends, commodity prices, and regional economic policies contribute to this diversification of growth prospects. As the global economic landscape evolves, understanding these regional dynamics becomes crucial for grasping the broader trends shaping the world economy.

Global Interest Rate Dynamics

Their Impact on Indias Financial Sector

With the global economy on a cautious path to recovery, central banks worldwide have been balancing the dual mandate of curbing inflation and fostering economic growth, leading to a fluctuating interest rate environment. This scenario is set against a backdrop of gradual improvement, as the International Monetary Fund (IMF) forecasts global growth to marginally increase to 3.1% in 2024 from its previous estimation, with a slight improvement to 3.2% in 2025. The IMF also anticipates a decrease in global headline inflation to 5.8% in 2024 and further to 4.4% by 2025, suggesting a moderating inflationary pressure across regions due to resolved supply-side issues and stringent monetary policies ("World Economic Outlook," IMF, April 2023).

For India, the interconnection with the global financial system means that these global interest rate trends could significantly influence its domestic monetary policy decisions, particularly those made by the Reserve Bank of India (RBI). The RBIs efforts to balance inflation control with growth promotion could be affected by global interest rate movements. A global uptick in rates may prompt the RBI to tighten monetary policy to protect the rupee and contain inflationary pressures, potentially leading to higher domestic borrowing costs. Conversely, a global easing of interest rates could allow the RBI to reduce domestic rates, thereby fostering a conducive environment for investment and consumption within India.

This global-to-domestic transmission mechanism could have profound implications for Indias banking and NBFC sectors. A tighter monetary environment, characterised by higher interest rates, could exacerbate asset quality challenges for these institutions, as higher borrowing costs could lead to increased defaults and a rise in non-performing assets (NPAs). Alternatively, a stable or declining interest rate environment could catalyse credit growth, support economic recovery efforts, and enhance the financial health of the banking and NBFC sectors.

Therefore, as the global economic narrative unfolds, with its direct and indirect influences on Indias economic policies and financial sector dynamics, the ability of Indian banks and NBFCs to navigate these uncertain waters will be paramount. Adopting robust risk management frameworks and innovating financial products will be essential for these institutions to mitigate the potential adverse effects of interest rate volatility and to capitalise on the opportunities that may arise from the evolving global and domestic economic landscape.

Overview of the Indian Economy:

Solid Foundations:

Indias Financial Stability in the Face of Global Headwinds

Despite the prevailing global economic challenges, the Indian economy is on a sustained growth and resilient trajectory. The countrys financial infrastructure demonstrates robustness, further reinforced by the continuous improvement in the health of its financial institutions. Recent proactive regulatory measures are anticipated to curb the accumulation of financial stress, particularly from the surge in unsecured borrowing and the rapid expansion of consumer credit. Although the global economic situation poses potential risks, along with the growing interconnectedness within the domestic financial landscape and the expanding role of Non-Banking Financial Companies (NBFCs) in financial services, the foundational strength of Indias banking sector, characterised by substantial capital reserves, regulatory vigilance, and solid balance sheets, is expected to provide a stable platform. This foundation is critical for the banking system to navigate through potential challenges and continue supporting the productive sectors of the economy, thus contributing to its growth momentum.

The World Bank and the IMF have both projected strong growth rates for India in the upcoming years, reflecting optimism about the Indian economys resilience amidst global challenges. The World Bank forecasts Indias GDP to grow 6.4% in 2024 and 6.5% in 2025, indicating a steady upward trajectory. Similarly, the IMF has projected a robust growth rate of 6.5% for India for 2024 and 2025, showcasing the countrys strong economic fundamentals and capacity to sustain growth even in the face of global headwinds.^5,6

These projections are significant when the global economy faces several uncertainties. Yet, Indias economy is expected to weather these challenges and emerge as a critical driver of global growth. The consistent growth rates anticipated by both the World Bank and the IMF highlight Indias robust domestic demand and the effectiveness of ongoing economic reforms in fostering a conducive environment for sustainable growth.

Industry Overview:

The Rise of NBFCs in India:

Driving Credit Expansion and Economic Resilience

The Non-Banking Financial Companies (NBFCs) in India have been pivotal in bridging the credit gap for various segments of the economy, notably the Micro, Small, and Medium Enterprises (MSMEs) and the underbanked populations. These institutions have complemented the traditional banking sector by offering financial services tailored to the unique needs of their clients, leveraging their extensive geographical reach and quick service delivery.

Indias robust economic growth, expected at 6.21% for FY 2024, is underpinned by strong domestic demand alongside notable expansions in the manufacturing and services sectors. This growth trajectory is anticipated to sustain a vigorous demand for credit, particularly among MSMEs and retail sectors, with projections indicating a Growth rate of 13-14% in credit demand. NBFCs, with their flexible and diverse business models, are well-positioned to meet this demand efficiently.

The transformative shift in Indias financial services landscape over recent years, driven by digital innovations such as neo-banking, digital authentication, the proliferation of the Uni_ed Payments Interface (UPI), and increased mobile internet usage, has redefined the dynamics of financial services, especially credit. The modularisation of financial services facilitated by these advancements has empowered NBFCs to offer specialised and accessible financial products.

The NBFC sector is witnessing a resurgence post-pandemic, with anticipated credit growth rates of 13–14% for FY 2024. The industry is also seeing the emergence of new NBFCs focusing on niche customer segments, a trend likely to continue in the foreseeable future. The pandemic has accelerated technology adoption and changed consumer behaviours, making it feasible for NBFCs to operate without extensive physical networks, reducing the capital requirements traditionally associated with setting up financial services institutions.

Between FY 2023 and FY 2025, the NBFC sector is expected to witness a Compound Annual Growth Rate (CAGR) of 13–15% in credit extension. This growth is a testament to the sectors resilience and reflects its crucial role in supporting Indias economic development by enhancing formal credit penetration among underserved populations.⁷

1. Taper Tantrum crisis of 2013 refers to foreing investors pulling out money from equities and bonds in emerging markets as a reaction to US Fed announcement of reducing/ceasing its bond purchase program; this led to a tightening of liquidity available in the market, impacting both banks & NBFCs Note: Analysis has been made based on 31 NBFCs (10 HFCs, 2 Gold, 3 MFI and 16 Diversified NBFCs) and 35 Banks (12 PSU, 10 Private-New, 9 Private-old banks and 4 Small Finance Banks) *For H1FY23 and H1FY24, HDFC ltd and Shriram City Union have been excluded Source: Capitaline. Quarterly Results. Investor Presentation. Annual Report. BCG Analysis

The future growth of the NBFC sector in India will be shaped by a confluence of factors, including policy support, regulatory oversight, and the continued digitisation of the financial value chain. These elements will collectively contribute to the sectors ability to support the broader narrative of Indias economic expansion, making NBFCs indispensable to the nations growth story.

Deep Demographic and Address -able Market Understanding:

NBFCs have carved out a significant niche by catering to the economys unorganised and less developed segments. Their deep understanding of customer needs, especially in remote and rural areas, has allowed them to guarantee last-mile delivery of financial products and services, making finance accessible to a broader population base.

Tailored

Product Offerings:

Recognising the diverse needs of different customer segments, NBFCs have developed specialised financial products and services. By analysing the specific characteristics and requirements of their target segments, these institutions have been able to offer customised pricing models and financial solutions, enhancing customer satisfaction and loyalty.

Wider and Effective Reach:

Expanding their operations to include Tier 2, Tier 3, and Tier 4 markets, NBFCs have effectively distributed loans across multiple customer touchpoints. The emphasis on creating a connected channel experience ensures an omnichannel, seamless sales and service experience that is accessible 24/7, significantly enhancing customer engagement and satisfaction.

Co-Lending Initiatives:

The Reserve Bank of Indias co-lending norms, introduced in November 2020, have facilitated partnerships between banks and NBFCs for priority sector lending. This collaborative approach has broadened the reach of financial services, enabling more efficient credit distribution to underserved sectors.

Technology Advancements and Fintech Ecosystem:

Technological innovation has played a crucial role in transforming the NBFC sector. Adopting digital tools and platforms has streamlined operations, improved efficiency, and significantly enhanced the customer experience. The growth of the fintech ecosystem has further supported the development of innovative financial products and services.

Government and Central Bank Initiatives:

The Indian government and the Reserve Bank of India have introduced several initiatives to address structural challenges in the small business lending segment. These initiatives, including the licensing of account aggregators, Pradhan Mantri Mudra Yojana (PMMY), the launch of UPI platforms, TReDS, GeM, ONDC, and the implementation of GST, have played a pivotal role in promoting financial inclusion and supporting the growth of the NBFC sector.

MSME Sector:

The credit hunger continues

The MSME sector is the cornerstone of Indias economic framework, contributing to nearly one-third of the nations GDP. These enterprises foster entrepreneurial growth and deliver various products and services locally and internationally. MSMEs are vital in generating numerous employment opportunities with relatively lower investment than their larger counterparts, playing a critical role in the industrialisation of less developed and rural regions, thus aiding in balancing regional disparities and fostering a more equitable distribution of income and wealth throughout the country.

Data from the National Sample Survey (NSS) indicates that there are approximately 633.88 lakh non-agriculturally focused, unregistered MSMEs involved in diverse economic pursuits, not counting those registered under the Factories Act or Companies Act, or those in the construction sector. The micro-enterprise segment dominates, making up more than 99% of these MSMEs, with about 630.52 lakh such enterprises identified. In contrast, small and medium enterprises constitute only 0.52% and 0.01% of the MSME spectrum. The distribution of MSMEs is almost evenly split between rural- 51.25% and urban- 48.75% locales.⁸

All MSME fund-based (WC-TL) Originations considered excluding Renewals Micro Exposure up to Rs. 1 cr. Small: Exposure between Rs. 1 cr. Rs. 10 crs; Medium Exposure between Rs. 10 crs and Rs. 50 crs Source: Trans Union CIBIL commercial credit database

The SIDBI Report for February 2024 highlights a positive outlook for credit demand from the MSME sector in 2024, emphasising the continuation of growth momentum driven by increased economic activities. The report indicates a significant rise in commercial loan demand, with a notable 29% growth in the July-September 2023 quarter compared to the same period in 2022. This surge in demand is attributed to the expansion of MSME lending by banks and NBFCs, facilitated by advancements in digital lending infrastructure and the availability of enriched credit data. The report suggests a robust and sustained credit supply to the MSME sector, underlining the sectors pivotal role in Indias economic growth and the importance of leveraging data and analytics for sustainable sectoral growth.⁹

SBFC Finance Limited is a systematically important non-deposit-taking Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India and is classified under Middle Layer pursuant to Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023. SBFC is a professionally managed organization, with Clermont Group (which consists of SBFC Holdings Pte. Ltd. and Clermont Financial Pte. Ltd.) and the Arpwood Group (which consists of Arpwood Capital Private Limited, Arpwood Partners Investment Advisors LLP, and Eight45 Services LLP) being its co-promoters. SBFC is primarily focussed in lending to MSMEs. The Lending product portfolio consists of Secured MSME loans and Loan against Gold and Fee-based products consists of Loan Management Services for third-party financial institutions.

The Company transitioned into a public limited company and got its equity listed on National Stock Exchange and Bombay Stock Exchange on 16^th August 2023.

Shareholding Pattern as on 31^st March 2024

Category of Shareholders	% Share
PROMOTERS
Clermont Group	55.21%
Arpwood Group	5.45%
OTHER MAJOR SHAREHOLDERS
SBI Mutual Fund	7.22%
Amansa Group	4.13%
Malabar Funds	4.12%
Steadview Capital	1.86%
Aditya Birla Sun Life Trustee	1.53%
Massachusetts Institute of Technology	1.46%
OTHERS	19.02%
	100.00%

Business Analysis:

MSME Loans:

SBFC Finance Limited has a widespread presence across the country, operating in 16 states and 2 union territories, through its extensive network of 183 branches in underbanked tier II and tier III cities. Notably, our asset under management (AUM) distribution is carefully managed to avoid high concentration in any single state, a strategy that has allowed us to maintain low state-wise AUM concentration levels even as we expand.

Our primary focus is on small enterprise borrowers, a proven history of loan repayments with a CIBIL score of over 700 at origination. We engage customers directly through our sales force, leveraging branch-led local marketing which fosters strong customer relationships, satisfaction, and loyalty. Our rigorous risk management and underwriting processes, complemented by extensive customer assessments and monitoring systems, contribute to our healthy portfolio indicators with Gross NPA of 2.43% as of March 31, 2024.

The MSME segment has seen a remarkable 45.5% growth, with Assets Under Management (AUM) of Rs. 57,044 million, which accounts for 84% of our total AUM of Rs. 68,219 million. The Gross Non-Performing Assets (GNPA) ratio for our MSME Loan portfolio is 2.74% as on 31^st March 2024, reflecting our commitment in maintaining the quality while growing the portfolio.

Gold Loans:

Clients can leverage their gold assets with our Gold Loan offering by securing a loan against them. Up to 75% of the golds value may be advanced as a loan amount. Owing to the nature of these loans, secured by gold jewellery, the process demands minimal documentation and credit checks, thus expediting transaction times and simplifying client interactions. Our commitment to efficiency allows us to finalise gold loan transactions swiftly, backed by advanced technology, pro_cient personnel, and streamlined procedures. The Company offers bouquet of schemes to suit varied needs of customers, wherein there is a flexibility to choose from different tenors and different repayment schedules.

Gold Loan business has witnessed declining yields emanating from intense competitions and new entrants, however the yields rebounded during the latter half of the year. The Company has adopted a model of operating the business through fewer branches. This segment has seen a growth of 19.6% with Assets Under Management (AUM) of

Rs. 10,338 million, which accounts for 15% of our total AUM of

Rs. 68,219 million. The Gross Non-Performing Assets (GNPA) ratio for our Gold Loan portfolio remained low at 0.48% as on 31^st March 2024.

Financial Performance:

Particulars	FY 2024	FY 2023	Y-o-Y%
Interest Income on Loans	8,661	5,953	45%
Interest Income other than on Loans	522	589	-11%
Fee & Other Income	1,015	862	18%
Total Income	10,198	7,404	38%
Finance Cost	3,506	2,765	27%
Operating Expenses	3,061	2,304	33%
Pre-Provisioning Operating Profit	3,631	2,335	56%
Credit Cost	470	321	46%
Tax Expense	791	517	53%
Profit after Tax	2,370	1,497	58%
Basic EPS (Rs./ Share)	2.35	1.71
Diluted EPS (Rs./ Share)	2.29	1.62

 

Particulars	FY 2024	FY 2023	Variance
Return on Total Tangible Assets (%)	3.86%	3.07%	+ 79 bps
Return on Tangible Equity (%)	11.90%	12.01%	- 11 bps
Net Interest Margin (%)	9.67%	9.32%	+35 bps
Operating Expenses to Average AUM (%)	5.22%	5.70%	-48 bps
Total Borrowings to Tangible Equity ratio	1.59	2.55
Net NPA (%)	1.36%	1.58%	-22 bps

Equity

The Company has raised Rs. 1,500 million in the month of May, 2023 by issue of 27,272,727 equity shares on private placement basis and have thereafter successfully completed Initial Public Offer ("IPO" or "Issue") comprising of fresh issue of 105,301,883 Equity Shares aggregating to Rs. 6,000 million and offer for sale 74,561,402 Equity Shares aggregating to

Rs. 4,250 million, the shares of the Company were thereafter listed in The National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) on 16^th August, 2023. This has increased the tangible networth of the Company from

Rs. 14,669 million as of 31^st March 2023 to Rs. 25,178 million as of 31^st March 2024. Total Borrowings to Tangible Equity ratio hence has improved from 2.55 as of 31^st March 2023 to 1.59 as of 31^st March 2024.

Return on total tangible assets

The AUM of the company as of 31^st March 2024 is reported at Rs. 68,219 million with a growth of 38%. The yield on Loan Book has increased from 15.91% in FY 2023 to 16.71% in FY 2024 consequent to the increase in the Interest rates while maintaining the spread of 7.68% in FY 2024. The Operating Expenses to Average AUM reduced from 5.70% in FY 2023 to 5.22% in FY 2024 due to improvement in operating leverage. The improved profitability along with increased equity has resulted in improvement in Return on total Tangible Assets from 3.07% in FY 2023 to 3.86% in FY 2024.

Risk Management Framework:

The Company has implemented comprehensive Enterprise Risk Management (ERM) framework, which is applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, manage risk within its risk appetite, to provide reasonable assurance regarding the achievement of companys objectives. The objective of ERM is to lay down the broad principles, guidelines and procedures governing the framework for risk identification, assessment, measurement and reporting process of the business risks. The policy aims to ensure that all material risks can be identified and managed in a timely and structured manner.

The cornerstone of our risk management framework is a culture of risk awareness and accountability across all levels of the organisation. Training programs, regular audits, and feedback mechanisms are in place to ensure that our team is equipped with the knowledge and tools to identify and mitigate risks effectively

In 2024, we are not just continuing our journey on the robust path laid down by our foundational principles but elevating our risk management practices to new heights. Our strategy is deeply rooted in understanding the unique challenges and opportunities presented by the MSME and Gold Loan markets. By harnessing advanced analytics, up to date market intelligence and technology, we aim to avoid potential risks while capitalising on emergent opportunities.

Our approach involves a continuous risk assessment process, ensuring we remain proactive rather than reactive. For our MSME business, we emphasise on deeper understanding of industry-specific and geographical dynamics, segmenting borrowers with a set of variables and monitoring the portfolio performance at each segment, integrating the insights into the lending criteria to ensure resilience against economic volatility. In the Gold Loan business, we deploy stringent valuation practices and maintain a keen eye on gold fluctuations to safeguard against collateral value risks.

Mitigation Strategies

Nature of Risk	Description of the Risk	Mitigation Strategies by SBFC
Credit Risk	Fundamental concern due to the possibility of defaults in lending operations.	Rigorous underwriting process
		Comprehensive credit appraisal
		Diversified portfolio across sectors and geographies
		Advanced analytics for credit assessment
ALM & Liquidity	Risk of failing to meet short-term financial demands due to inadequate cash flow.	Effective Asset-Liability Management (ALM) framework
		Sufficient liquidity buffers
		Diversified funding sources
Operational Risk	Risks arising from failures in internal processes, people and systems, or from external events.	Stringent control mechanisms
		Continuous process improvement
		Adoption of advanced technology and cybersecurity measures
Fraud Risk	Loss arising due to internal or external frauds	Effective preventive and detective controls
		Risk based Internal Audit procedures
Cybersecurity Risk	Increased risk in the digital world related to IT infrastructure and data security	Significant investment in IT infrastructure and cybersecurity
		Regular audits and employee training
		Advanced security protocols
Reputational & Compliance Risk	Risks associated with non-compliance with applicable regulations and guidelines	Dedicated legal and compliance teams
		Comprehensive compliance tools
		Ensuring adherence to regulatory requirements
		Monitoring regulatory developments
Strategic & business Risk	Risks inherent in strategic decisions, planning & execution.	Integration of strategic planning with risk management
		Agility and responsiveness to market dynamics
		Review of performances and KPIs and corrective action
ESG Risk	Recognising the impact of lending portfolios and operations on the environment.	Integrating climate and environmental considerations into risk assessment
		Evaluating and mitigating environmental impacts

Fraud Monitoring and Control:

SBFC employs a whistleblower policy as part of its measures to prevent fraud. Investigations are conducted to pinpoint the underlying causes of fraud, and appropriate corrective actions are implemented to avert future incidents. Committees dedicated to fraud prevention, comprising senior management and board members, review significant fraud events and take preventive measures. The Internal Audit team also executes a risk-based audit program to uncover fraudulent activities. These audit findings are reported to the Board and senior management for ongoing supervision and action.

Information Technology:

A robust Information Technology strategy, integral since our founding, is at the heart of our operations. Our unique "phygital" approach integrates technology with our personal customer relationships, enabling us to serve our target market effectively. For instance, our credit underwriting and risk management processes are technologically driven, enhancing customer service through quicker, more efficient decision-making. Our use of technology driven tele-calling enriches customer interactions, contributing to a superior service experience. Our commitment to continual investment in system upgrades—including security, data storage and backups—aims to bolster operational effectiveness, customer relations, and decision-making while enhancing business continuity and mitigating risks.

Technologys influence extends across various operational aspects, such as loan origination, underwriting, collections, risk, and audit, bringing about significant operating leverage and improvements. In FY 2024, our IT department made significant strides in strengthening our technological infrastructure, ensuring robust cybersecurity, and implementing innovative digital solutions. A key achievement was our journey toward ISO 27001 certification, reflecting our commitment to the highest standards of data security and operational excellence in the BFSI sector.

ISO 27001 Certification: We successfully achieved ISO 27001 certification, which involved a rigorous gap analysis, policydevelopment,andimplementationofrobustinformation security controls. This certification not only enhances our data security but also boosts regulatory compliance and stakeholder confidence.

eKYC Implementation: We advanced our digital transformation by implementing eKYC solutions across selected branches, leveraging Aadhaar-based biometric data for customer verification. This initiative has significantly enhanced customer convenience, reduced onboarding times, and aligned with regulatory requirements.

Cybersecurity Initiatives: Recognizing the sensitivity of financial data and the increasing cybersecurity threats, we adopted a multi-layered approach to cybersecurity:

Endpoint Protection Strategy: We deployed advanced antivirus, antimalware solutions, and Endpoint Detection and Response (EDR) systems to protect against a spectrum of cyber threats. Our comprehensive patch management and data encryption strategies further safeguard client data.

Continuous Monitoring and Threat Intelligence: By integrating real-time threat intelligence feeds and conducting continuous security monitoring, we have strengthened our defences against potential cyber threats.

Innovation and Technology Leadership: Our IT teams culture of innovation has been instrumental in driving forward our strategic initiatives:

Emerging Technologies: We have actively explored and integrated advanced technologies such as artificial intelligence, blockchain, and cloud computing. These technologies have been pivotal in enhancing our operational efficiencies and customer service capabilities.

Agile and Adaptive Operations: Our adoption of agile methodologies has enabled us to swiftly adapt to changing market conditions and effectively address evolving customer needs.

Internal Control System, Adequacy and Compliance:

Our company maintains a robust internal control, compliance, and audit framework tailored to match our operational scale and the intricate nature of our business. This framework aligns with the critical elements of internal control as outlined in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting, published by the Institute of Chartered Accountants of India (ICAI). We have established comprehensive internal controls across various business processes, focusing on operational efficiency, financial reporting accuracy, and adherence to relevant laws and regulations. These controls are designed to protect the companys assets, ensure the authenticity and authorisation of transactions, and provide a high level of confidence in our financial datas precision, impartiality, and dependability.

We are committed to continuously enhancing our internal control system by integrating advanced process controls and audit mechanisms. Our internal audit function is pivotal in reinforcing these controls, with audit findings being thoroughly reviewed both within the organisation and at Audit Committee meetings. The Audit Committee a committee of our Board of Directors, evaluates the sufficiency and ef_cacy of our internal control systems and offers recommendations for their fortification.

Human Resources and Industrial Relations:

In financial year 2024, SBFC continued to foster a workplace environment that prioritizes integrity, agility, and inclusiveness. Our human resources initiatives are designed to uphold a culture of excellence, drawing on the diverse talents of our workforce to drive innovation and performance.

Drive Inclusiveness and Employee Empowerment

Our commitment to diversity and inclusion is embodied in our leadership development and employee empowerment initiatives. Noteworthy programs such as the ‘Gender Diversity have been crucial in nurturing the careers of women leaders within the organization by providing them with opportunities for significant roles and contributions. This initiative has successfully transformed our work culture into one that values contributions from all genders equally.

Enhancing Work-Life Harmony

Life@SBFC encompasses our effort to create a harmonious work environment that respects and promotes the well-being of our employees. Regular health camps, sports activities, and cultural celebrations are integral to our approach, supporting not only physical wellness but also fostering a spirited community within the workplace. These activities are complemented by initiatives that celebrate diversity, such as the multicultural festival celebrations that enhance team spirit and collaboration across departments.

We Care - Corporate Social Responsibility

The ‘We Care initiative exempli_es our commitment to community engagement and social responsibility. SBFC Gurukul, under the National Apprenticeship Promotion Scheme, is a flagship program aimed at skill development for youth, including those from marginalized backgrounds. This initiative has not only facilitated employment within our company but also contributed to the broader societal goal of inclusive growth and development. Furthermore, our involvement in improving local school infrastructure and supporting inclusive education programs underscores our dedication to educational advancement and community support.

Looking Ahead

As we move forward, SBFC is dedicated to continuing these transformative HR practices and community engagement initiatives. We are committed to advancing these programs to not only enhance our internal work environment but also to make a positive impact on the broader community. Our ongoing efforts in training, health, and inclusiveness are set to expand, with a focus on integrating cutting-edge digital tools to streamline these processes and make them more effective.

Cautionary Note:

This report contains forward-looking statements based on information sourced from public domain reports by government bodies, industry associations, and others. These statements are subject to various risks and uncertainties, including economic conditions, changes in government policies, reliance on certain business sectors, and other variables. The outcomes or results may significantly vary from those projected in these forward-looking statements. Considering this report alongside the financial statements and related notes provided herein is essential. The company reserves the right to revise these statements without prior notice.

Acknowledgements:

We thank the Reserve Bank of India, other regulatory and government agencies, our auditors, customers, bankers, and shareholders for their continued support. We also express our sincere appreciation to all our employees for their dedication, hard work, and commitment, which have been instrumental in sustaining the companys growth trajectory.