SG Finserve Ltd Management Discussions

Indias real GDP growth for FY25 (April 2024 - March 2025) is estimated at 6.5%, according to the National Statistical Office (NSO). This marks a slowdown from FY24, but still represents a solid performance amid global headwinds, making it the fastest-growing major economy in the world for the fourth consecutive year.

This growth is driven by robust domestic consumption, government investment and relatively lower dependence on exports.

MANAGEMENT DISCUSSION & ANALYSIS

Private consumption in India reached a two-decade high in its share of the GDP. The Finance Ministry reported a rise to 61.4% in FY25, compared to 60.2% in the previous year. While investment saw a slight dip, it remained above pre-pandemic levels. For the full year, the nominal GVA for the farm sector stood at 10.4%, up from 9.6% in FY24, due to a strong monsoon that supported good Kharif and Rabi harvests. The Index of Industrial Production (IIP) growth recovered slightly to 3% in March from a six-month low of 2.72% in February, while overall industrial output growth for 2024-25 (FY25) stood at a four-year low of 4%.

This overall positivity is also reflected in the upward trend in GST revenue, alongside increased e-way bill generation and a more positive outlook among consumers. In 202425, GST recorded its highest-ever gross collection of H22.08 lakh crore,

reflecting a year-on-year growth of 9.4%. The average monthly collection stood at H1.84 lakh crore. All of this collectively points towards a growing dynamism within the economy. Adding to this encouraging picture of economic activity, Indian companies have also successfully attracted substantial foreign capital. Their reliance on External Commercial Borrowings (ECBs) reached a milestone;the cumulative value of ECB registrations during FY25 stood at $ 61.18 billion, indicating sustained interest from Indian firms in accessing overseas funding avenues.

Indias trade sector exhibited remarkable strength. Indias total exports have touched an all-time high of US$824.9 billion in the financial year 2024-25, as per the latest data released by the Reserve Bank of India on services trade for March 2025.

This marks a 6.01% growth over the previous years export figure of US$778.1 billion, setting a new milestone in the countrys trade trajectory.

What stood out was the jump in services exports, which also reached a record of US$387.5 billion in 2024-25, up 13.6% from US$341.1 billion in the previous year. For March 2025, services exports totalled US$35.6 billion, representing an 18.6% year-over-year increase from US$30.0 billion in March 2024. The main areas that contributed to the growth of these exports were telecommunications, computer services, transportation, travel and financial services.

Meanwhile, the economy experienced an easing of inflationary pressures. Inflationary pressures had considerably lessened, as retail inflation fell to its lowest point in six years at 4.6% in FY25, down from 5.4% the previous year. This improvement was reportedly supported by strategic actions and a strong harvest season, which helped stabilise food costs. The RBI responded with three consecutive rate cuts up until June 2025, bringing down the repo rate to 5.50%,easing borrowing costs for both businesses and households.

Outlook

Indias economic trajectory for FY26 is characterised by a cautiously optimistic outlook, with growth forecasted at ~6.5% in FY2026. Government officials attribute this resilience and positive forecast to the nations robust macroeconomic fundamentals. The outlook is further supported by a combination of domestic tailwinds,including low inflation, resilient domestic demand, a benign interest rate environment, lower crude oil prices and expectations of a good monsoon.

Other supporting factors are the consistently strong tax collections and the steady momentum observed in tax inflows. This sustained fiscal performance provides crucial support to the governments anticipated growth trajectory, enabling continued investment and expenditure in key aieas.

Indias long-term growth is poised to be propelled by strategic government initiatives, which represent reforms aimed at fostering future growth and enhancing economic resilience.

The rising government capital expenditure is expected to have a positive impact on growth,accompanied by a healthy expansion in private consumption. However, increasing geopolitical uncertainties, global trade risks and possible spillovers from US protectionist policies could threaten growth.

NON-BANKING FINANCIAL SERVICES SEGMENT

In FY25, Indias NBFC sector experienced strong growth, particularly in credit disbursement, surpassing that of the banking sector. NBFCs experienced a 20% rise in credit, compared to 12% for banks, as per a Boston Consulting Group (BCG) report. The sectors total balance sheet increased by 20% year-over-year to H28.2 trillion, with borrowings rising 22% to H19.9 trillion, reflecting robust funding activity.

Fueled by a burgeoning middle class, increased financial inclusion and proactive policy measures,

Indias NBFC sector has experienced

substantial growth, with housing finance, microfinance and consumer finance playing key roles in its expansion. A supportive regulatory framework and a stable macroeconomic backdrop have further contributed to this remarkable transformation since the sectors emergence.

Continuing this trend of supportive measures, the RBIs recent moves to relax some loan regulations and postpone tighter capital requirements have boosted confidence in the financial sector.

Consequently, NBFC stocks have become appealing to investors, particularly amidst current stock market volatility.

Specifically, the RBI has reversed stricter capital demands implemented last year for small personal loans, a change anticipated to facilitate continued lending by banks and NBFCs with reduced capital reserves.

A significant policy shift is the RBIs reduction of the risk weight for consumer microfinance loans by 25 percentage points, bringing it back to 100%. Risk weights dictate the amount of capital banks must

?€? Private equity and venture capital: Private equity and venture capital investments offer NBFCs both significant capital infusions and valuable strategic guidance

?€? Securitisation and asset reconstruction: Securitisation (selling loan portfolios) and collaboration with Asset Reconstruction Companies (ARCs) are increasingly becoming key strategies for NBFCs to manage risk and optimise their balance sheets

Non-banking financial Companies are increasingly integrating digital technologies into their operations.

This strategic shift aims to deliver superior customer experiencesand ensure compliance with evolving regulatory guidelines. Here are some key positive impacts of digitisation for NBFCs:

?€? Easier Data Access Benefits NonBanking Financial Company Operations: The India Stack and the Account Aggregator framework provide smooth and fast Know Your Customer and credit checks with

reliable data, enabling Non-Banking Financial Companies to reach more customers easily

?€? More Lending Opportunities Expand Non-Banking Financial Company Reach: The Reserve Bank of Indias digital credit push and platforms like the Open Network for Digital Commerce and the Open Credit Enablement Network will help Non-Banking Financial Companies lend to more people effectively

?€? Faster, Simpler Processes Enhance Non-Banking Financial Company Efficiency: Digitisation enables quicker loan approvals and simpler steps for customers, thanks to improved internal systems within Non-Banking Financial Companies

?€? Smarter Decisions, Safer Loan Portfolios for Non-Banking Financial Companies: With more data and better analysis, NonBanking Financial Companies can make quicker lending decisions and loan portfolios can be monitored more closely for better risk management

Factors that led to the growth of NBFCS in India

Understanding the customer	Customised product offering	Leveraging technology	Reaching out to wider audience	Risk management
Q Focus on unorganised & under-served segments of the economy Customisation of rigid policies to meet customer needs	\u2022 Emphasis on a limited line (or often a mono-line set of products) to serve the target customer segment \u2022 Adoption of non-standard pricing models for product lines, in-line with the customer profile and inherent risk of lending	Reduced time to market and enhance customer experience in Offering customised credit assessment models with optimised business processes	\u2022 Catering to the needs of tier-2, tier-3 and tier-4 markets \u2022 Distribution of loans across several customer touch- points with 24/7 sales and service	Improved governance with agile risk management model NBFCs continue to grow with Chief Risk Officer (CRO) Ensuring the highest standards of risk management

Outlook

In FY 2024-25, Indias NBFC sector faced multiple challenges. Liquidity constraints persisted due to the reliance on wholesale funding, with access tightening during periods of risk aversion. Asset quality issues, particularly in MSME, agriculture and microfinance segments, increased credit risks and stress were evident in specific sectors. Stricter RBI regulations, including capital adequacy and anti-evergreening

measures, have strained the compliance capabilities of smaller NBFCs. Rising interest rates elevated borrowing costs, squeezing net interest margins amid competition from banks and fintechs.

Corporate governance weaknesses risked reputational damage, while cybersecurity threats grew with digitalisation, demanding costly tech investments.

Interconnectedness with banks amplified systemic risks, requiring careful exposure management. Rural demand volatility and underwriting challenges hindered financial inclusion efforts, resulting in Indias credit-to-GDP ratio lagging behind that of advanced economies.

INDIAS INDUSTRIAL SECTOR

Key factors, including robust domestic demand, governmental support for manufacturing, increasing investments, favourable export figures and the adoption of innovative technologies, indicate sustained growth within Indias industrial sector. This evaluation persists even though the Index of Industrial Production (IIP) in FY 25 registered a cumulative growth of 4 per cent, which fell short of earlier expectations.

To drive industrial growth, the Government of India, with the Department for Promotion of Industry & Internal Trade (DPIIT) and other

central ministries playing key roles, is actively facilitating the establishment of new industries across Indias States and Union Territories.

Policy interventions and infrastructural enhancements are at the core of the governments initiatives to forge a robust industrial ecosystem. By employing modern tools such as the National Single Window System (NSWS) and the India Industrial Land Bank, these efforts are designed to ensure smooth industrial progress, thereby elevating

Indias competitiveness as a premier destination for manufacturing and investment worldwide.

A key initiative is the National Industrial Corridor Development Programme (NICDP), which is establishing new, environmentally sustainable industrial zones across the nation. Designed as world-class manufacturing centres to attract both local and foreign investment, the NICDP is developing corridors such as the Delhi-Mumbai Industrial Corridor (DMIC) and the Amritsar-Kolkata Industrial Corridor (AKIC) to reshape Indias industrial landscape.

MANAGEMENT DISCUSSION & ANALYSIS

Additionally, the government is actively promoting industrial growth in Jammu & Kashmir, Ladakh, Himachal Pradesh and Uttarakhand. Through Central Sector Schemes,such as the Industrial Development Scheme (IDS), substantial funds have been allocated to stimulate industrial activities in these regions.

Budget allocation

The Budget for 2025-26 includes an allocation of H2,500 for a new scheme focused on developing ready-to-use

("plug and play") industrial parks with complete infrastructure to ease investment.

Several key segments have seen increased budget allocations for the next fiscal year, including intellectual property related works (H321.34 crore), the Footwear, Leather and Accessories Development Programme (H350 crore), the National Industrial Corridor Development and Implementation Trust (H2,500 crore), Fund of Funds 2.0 (H2,000 crore) and the PLI scheme for white goods (H444.54 crore).

The minister also announced a new National Manufacturing Mission to support the "Make in India" initiative through policy, roadmaps, governance and monitoring for the manufacturing sector.

Additionally, funds for the Industrial Development of the UT of Jammu & Kashmir have been increased to H300 crore for the fiscal year 2025-26.

In FY 2025, the Indian government introduced several strategic initiatives aimed at bolstering the industrial sector:

Industrial Infrastructure & Manufacturing

In FY 2025, the government launched the National Manufacturing Mission (NMM) to boost Make in India by developing sector-specific clusters and easing regulations. It sanctioned 12 industrial parks and planned "plug-and-play" hubs in 100 cities. The Critical Mineral Mission was introduced to secure key raw materials, and a H3,706 crore semiconductor plant, jointly developed by HCL and Foxconn, was approved to support the electronics manufacturing sector.

Employment & Skilling Initiatives

To boost workforce readiness, the government launched a skilling scheme to upgrade 1,000 ITIs and train 20 lakh youth. Incentives were offered for hiring, including EPFO reimbursements and direct transfers for new employees. An internship program for one crore youth was also introduced, with stipends and one-time assistance to enhance industry exposure.

MSME Support & Credit Access

MSMEs were supported through higher Mudra loan limits (H10-20 lakh) and an enhanced Credit Guarantee Scheme with coverage up to H100 crore. A new MSME Credit Card was launched to provide easy access to revolving credit, while the food processing sector received funding for irradiation units and safety laboratories.

Trade, Logistics & Digital Infrastructure

Digital infrastructure was strengthened with the launch of Bharat Trade Net, which streamlines trade processes and supports the integration of ULIPs. A H25,000 crore Maritime Development Fund was created to modernise ports, while investments in Digital Public Infrastructure aimed to boost innovation across logistics, MSMEs, education and e-commerce.

allocation of H23,168 crore in the FY26 Union Budget, reflecting a 4.6% increase compared to the FY25 Budget.

This has raised the investment limits for MSMEs by 2.5 times and doubled the turnover thresholds

?€? RAMP scheme: The "Raising and Accelerating MSME Performance" scheme, launched in 2022, has benefited 4 lakh micro, small and medium enterprises. Women- owned businesses comprise over 38% of the registered MSMEs, underscoring the governments commitment to empowering female entrepreneurs

?€? Self-Reliant India Fund Scheme: This scheme offers equity funding to MSMEs with growth potential, enabling them to expand and achieve self-reliance

The MSME sector in India comprises over 63 million enterprises. This makes it a dynamic and energetic force within the Indian economy. It significantly drives entrepreneurship nationwide. Furthermore, the sector is a substantial source of employment.

It ranks second only to agriculture in terms of providing jobs. This is achieved with relatively lower capital investment compared to other large- scale industries. As of December 2024, 5.70 crore MSMEs, employing 24.14 crore people, are registered on the Udyam Registration Portal and the Udyam Assist Platform (UAP).

To bring more businesses into the formal sector, the Ministry of MSME, along with its Development & Facilitation Offices (DFOs), state governments and other stakeholders, has actively promoted special registration campaigns nationwide.

A key initiative supporting this formalisation is the Credit Guarantee Scheme for Micro & Small Enterprises, which provides collateral-free loans.

In 2024 alone (from January 1 to December 30), this scheme approved

1.99 million guarantees, totalling H2.44 lakh crore, according to official data. The government is also promoting the MSME sector through other notable schemes:

?€? MSME-Trade Enablement & Marketing (MSME-TEAM) Scheme: This scheme aims to enhance the market access and trade capabilities of MSMEs

?€? Prime Ministers Employment Generation Programme (PMEGP): PMEGP facilitates the creation of employment opportunities by assisting in the establishment of new micro-enterprises

?€? Budget boost: The Union Ministry of Micro, Small and Medium Enterprises has received an

?€? Public Procurement Policy for Micro and Small Enterprises: This policy mandates a certain percentage

of government purchases from MSMEs, thereby providing them with market opportunities

?€? Procurement and Marketing Support (PMS) Scheme: The PMS scheme assists MSMEs in marketing their products and securing government procurement orders

Additionally, the government has recently increased the investment and turnover limits for the Ministry of MSME, allowing more businesses to access sector benefits. With over 10 million MSMEs employing 75 million people and making significant contributions to manufacturing and exports, they are a crucial engine

of growth. The new classification raises investment limits to H2.5 crore (micro), H25 crore (small) and H125 crore (medium), along with increased turnover thresholds.

New classification of MSME

Type	Investment		Turnover
	Current	Revised	Current	Revised
Micro Enterprise	H1 cr	H2.5 cr	H5 cr	H10 cr
Small Enterprise	H10 cr	H25 cr	H50 cr	H100 cr
Medium Enterprise	H50 cr	H125 cr	H250 cr	H500 cr

SOURCE: BUDGET 2025-2026, SPEECH OF NIRMALA SITHARAMAN, UNION MINISTER OF FINANCE; FEBRUARY 1,2025

The MSME sector is poised to steer Indian economic growth

ROLE OF SUPPLY CHAIN

The efficiency and resilience of Indias supply chain play a pivotal role in its journey to becoming the fastest- growing economy. India is emerging as a reliable alternate destination for manufacturers and supply chain diversification due to its large labour and consumer base, low operating costs and linkages to important international markets.

Generating approximately $250 billion annually and accounting for 14.4% of Indias GDP, the logistics industry is experiencing rapid growth, according to the India Brand Equity Foundation (IBEF).

Within this dynamic sector, MSMEs are becoming increasingly significant and are particularly well-suited to benefit from the expanding opportunities due to their inherent flexibility and adaptability.

Government initiatives

?€? PM Gati Shakti National Master Plan: An integrated multi-modal connectivity plan to improve infrastructure and reduce logistics costs

?€? Unified Logistics Interface Platform (ULIP): This platform aims to integrate various digital systems across the

logistics sector, providing MSMEs with enhanced visibility, improved tracking and increased efficiency in their supply chains

?€? Logistics Efficiency Enhancement Programme (LEEP): A program focused on developing multi-modal logistics parks and improving warehousing efficiency

?€? Dedicated Freight Corridors (DFCs): Development of dedicated railway lines for freight movement to de- congest existing networks and reduce transit times

SG Finserve Limited (SGFL), formerly known as Moongipa Securities Limited, operates as a non-banking finance company with a specialised focus on supply chain financing throughout Indias diverse industrial ecosystem. Leveraging a technology- integrated platform, SGFL delivers customised financial solutions that cater to a wide spectrum of clients, ranging from large corporations to micro-level vendors.

The company extends crucial financial support to key players within the supply chain, including dealers, distributors, vendors, retailers

and logistics providers, thereby facilitating efficient financial flows at each operational stage. SGFLs publicly listed equity shares on the BSE underscore its commitment to transparency and growth. Furthermore, SGFLs strong credit ratings- CRISIL AA (CE) for long-term debt and A1 + for short-term debt and commercial paper- affirm its position as a stable and dependable financial entity. The company maintains a steadfast commitment to empowering Micro, Small & Medium Enterprises (MSMEs), actively working to enable their progress and expansion.

SG Finserve Limited (SGFL) has established a robust and scalable business model, underpinned by its internally developed, comprehensive technology platform that is adaptable to diverse industry sectors. The companys credit assessment methodologies have consistently resulted in strong asset quality.

Under the guidance of an experienced team of corporate professionals, SGFL is committed to contributing to a new phase of financial advancement and stability in India.

HUMAN RESOURCES

The Company deeply appreciates the invaluable contribution of its human capital, whose dedication and enthusiasm are instrumental in realising the Companys vision. To foster a lasting relationship with this vital asset, the Company proactively engages with its employees through diverse channels, thereby strengthening employee retention. Furthermore, the Companys commitment extends beyond merely offering an appropriate setting and opportunities for advancement. It places a significant emphasis on various employee welfare programs designed to maintain a consistently motivated and engaged workforce.

FINANCIAL PERFORMANCE

Synopsis foi FY- 2025

During FY 2025, the Company demonstrated resilient financial performance despite market fluctuations and macroeconomic challenges. Revenue registered steady growth driven by strong operational execution, diversified business segments, and customer-centric strategies. Profitability improved through effective cost optimization, digital transformation initiatives, and enhanced efficiency across processes. The balance sheet remained robust with healthy liquidity, prudent capital allocation, and controlled leverage. The Company continued to deliver value to stakeholders through consistent returns, while maintaining a focus on long-term sustainability and growth. Overall, FY 2025 reflected a year of stability, strategic progress, and a strong foundation for future expansion.

Key Numbers

Particulars (INR crores)	FY25	FY24	Change %	ROA Tree
Interest Income	165.86	182.11	-9%	10.97%
Fee & Other Income	5.18	7.61	-32%	0.34%
Dividend Income	0.00	0.00
Operating Income	171.04	189.72
Other Non-operating Income	0.00	0.00
Total Income	171.04	189.72	-10%	11.32%
Interest expenses	31.98	63.96	-50%	2.12%
Net Interest Income	139.06	125.76	11%	9.20%
Operating expenses	26.61	17.94	48%	1.76%
Profit before Provision & Tax	112.45	107.82	4%	7.44%
Impairment on Financial Assets*	2.29	2.79	-18%	0.15%
Profit Before Tax	110.16	105.03	5%	7.29%
Income Tax	29.17	26.44	10%	1.93%
Profit After Tax	80.99	78.59	3%	5.36%
Loan Book EOP	2,326	1,673	39%

" Provision on Standard Assets

COMPARISON OF Q4-FY2025 VIS-A-VIS Q4-FY2024

In Q4FY25, the company reported a total income of H56.66 crores, a 3% decline compared to H58.55 crores in Q4FY24, mainly due to a 3% dip in interest income and a significant 58% fall in fee & other income. Operating income stood at H54.12 crores, down 8% year-on-year. Net interest income also declined by 6% to H35.56 crores, while operating expenses surged 46% to H9.99 crores, putting pressure on profitability. Consequently, profit before provision and tax fell 9% to H28.12 crores. Despite higher impairment on financial assets, profit before tax was almost flat at H31.07 crores versus H31.19 crores last year. Profit after tax remained stable at H23.79 crores against H23.80 crores in Q4FY24. Notably, the loan book expanded strongly by 39% to H2,326 crores, reflecting robust business growth despite margin pressures.

Key Numbers

Particulars (INR crores)	Q4FY25	Q4FY24	Change %	ROA Tree
Interest Income	52.22	54.02	-3%	12.54%
Fee & Other Income	1.89	4.53	-58%	0.45%
Dividend Income	0.00	0.00
Operating Income	54.12	58.55	-8%	13.00%
Other Non-operating Income	2.54	0.00
Total Income	56.66	58.55	-3%	13.61%
Interest expenses	18.55	20.69	-10%	4.46%
Net Interest Income	35.56	37.86	-6%	8.54%
Operating expenses	9.99	6.82	46%	2.40%
Profit before Provision & Tax	28.12	31.04	-9%	6.75%
Impairment on Financial Assets*	-2.96	-0.87	-18%	0.15%
Profit Before Tax	31.07	31.19	-3%	7.46%
Income Tax	7.28	8.11	-14%	1.75%
Profit After Tax	23.79	23.80	0%	5.72%
Loan Book EOP	2,326	1,673	39%

" Provision on Standard Assets

KEY NUMBERS

Particulars (INR crores)	As on 31-March-2025 (INR crores)	As on 31-March-2024 (INR crores)
Secured	1,807	1,333
Unsecured	439	340
Total	2,246	1,67 3

(INR crores)

State	Loans o/s as on 31-Mar-25	%-age of Loan Book
Andhra Pradesh	3.9 2	0.17%
Assam	2.97	0.13%
Bihar	3.64	0.16%
Chhattisgarh	52.39	2.33%
Delhi	287.13	12.80%
Goa	8.89	0.40%
Gujarat	117.64	5.24%
Haryana	117.6 3	5.24%
Himachal Pradesh	0.7	0.03%
Jammu & Kashmir	0	0.00%
Jharkhand	3.85	0.17%
Karnataka	377.38	16.80%
Kerala	109.31	4.87%
Madhya Pradesh	10.05	0.45%
Maharashtra	457.16	20.35%
Nagaland	0.24	0.01%
Punjab	1.96	0.09%
Rajasthan	30.85	1.37%
Tamil Nadu	125.17	5.57%
Telangana	8 3.40	3.71%
Uttar Pradesh	382.3 5	17.02%
Uttarakhand	35.22	1.57%
West Bengal	26.5 3	1.18%
Orissa	7.66	0.34%
Daman & Diu	0	0.00%
Total	2,246.04	100%

INTERNAL CONTROL & ITS ADEQUACY

At SG Finserve, internal control procedures include internal financial controls, ensuring compliance with various policies, practices and statutes that take into account the organisations growth and operational complexity. The framework constantly monitors and assesses all aspects of risks associated with current activities and corporate profiles, including development, commercial and financial risks.

The Company has implemented management reporting and internal control systems to monitor performance, strategy, operations, business environment, organisation, procedures, funding, risk and internal control. The internal auditors carry out extensive audits throughout the year across all functional areas and submit their reports to theAudit

Committee.

RISK MITIGATION

To achieve its goals, the Company recognises the critical importance of managing both current and future risks. This is facilitated by a comprehensive risk management framework in place throughout the organisation, which supports the Companys adopted comprehensive and integrated risk appraisal, mitigation and management process. The Board periodically reviews and improves the risk mitigation measures arising from this process.