Shreevatsaa Finance & Leasing Ltd Management Discussions

OVERVIEW

Your Company is a Non-Deposit Non-Systemically Important NBFC with a record of consistent growth and profitability. This Management Discussion and Analysis Report have to be read in conjunction with the Companys financial statements, which follows this section. The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and as per Indian Accounting Standards (Ind AS) and as per the directions issued by Reserve Bank of India for Non- Banking Financial Companies from time to time, wherever applicable. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner the form and substance of transactions, and reasonably present the Companys state of affairs and profits for the year. The following discussion may include forward looking statements which may involve risks and uncertainties, including but not limited to the risks inherent to Companys growth strategy, change in regulatory norms, economic conditions and other incidental factors. Actual results could differ materially.

ECONOMY OVERVIEW

GLOBAL ECONOMY

The global economy in 2024 exhibited both progress and emerging challenges. Inflation eased from multidecade highs but showed uneven trends, with core goods inflation seeing an uptick late in the year and services inflation being on a downward trend. Labour markets stabilised, as unemployment returned to pre-pandemic levels. Trade dynamics faced disruptions from widespread U.S. tariffs, which triggered historic equity market corrections, spikes in bond yields and amplified policy uncertainty. Trade activity, particularly driven by heightened Chinese exports and U.S. imports, showcased the capacity of economies to pivot effectively amid evolving policy landscapes.

Geopolitical tensions remained heightened, posing risks to international monetary system. Primary commodity prices rose by 1.9% between August 2024 and March 2025, driven by increases in natural gas, precious metals, and beverage prices.

Conversely, oil prices declined due to concerns over reduced global demand from trade tensions, alongside robust production growth outside.

OPEC+ and the gradual reversal of OPEC+ supply cuts. The global economic environment is thus poised for significant shifts in 2025, driven by evolving market dynamics, geopolitical realignments and structural transformations across industries.

Outlook

The global economy faces increasing headwinds in 2025, with growth expected to moderate to 2.8%. Trade tensions continue to weigh on investment sentiment, while widespread tariffs amplify inflationary pressures. Advanced economies are anticipated to experience slower growth due to subdued consumption and fiscal constraints. Emerging markets are likely to see uneven progress, with domestic vulnerabilities and structural challenges hampering recovery in some regions, particularly in Asia.

INDIAN ECONOMIC

India retained its position as the 5th largest economy, maintained its status as the fastest growing amongst large economies and is expected to be the third largest economy by 2027 (crossing GDP of $5 Tn) after USA and China. The Indian economy is expected to grow by 6.2% in CY25.

The Indian economy demonstrated resilience amidst global uncertainties during FY2025, supported by robust domestic growth drivers and sound macroeconomic fundamentals. Despite external headwinds from escalating trade tensions and awakening global outlook, India continues to be one of the fastest-growing major economy. Key sectors such as agriculture benefited from favourable monsoon, higher summer sowing acreage, and strong rabi and kharif harvests, ensuring food security and stable rural incomes. Industrial and services activities remained buoyant, with manufacturing PMI reaching an eight-month high in March 2025, driven by increased new orders and output. Inflation moderated significantly, with headline CPI inflation declining to a 67-month low of 3.3% in March 2025, primarily due to easing food prices. The financial sector remained stable,

supported by proactive liquidity measures by the Reserve Bank of India. These developments underscore Indias strong macroeconomic fundamentals and its ability to navigate global uncertainties effectively.

India is 4th Largest Market by Market Cap

Indias domestic equity markets continue to rank fourth-largest globally with over $4.0 Tn on market cap. Table: India is the 4th largest market by Market Capitalisation. Table: India is the 4th largest market by Market Capitalisation.

Country	US$ Tn Market Cap
USA	59.3
China	7.8
Japan	5.6
India	4.4
United Kingdom	3.9

Source: https://companiesmarketcap.com/allcountries/ (as on 26th May 2025)

Outlook

With a robust demographic dividend, accelerating digital transformation, and a strong reform-driven policy framework, the Indian economy stands poised to emerge as a global powerhouse.

Industry Overview

INDIAN FINANCIAL SERVICES INDUSTRY OVERVIEW

FY2025 witnessed robust growth in Indias financial sectors, marked by improved banking metrics, significant financial inclusion, thriving capital markets, and strong macroeconomic fundamentals.

- Indias monetary and financial sectors displayed resilience and stability, fostering inclusive growth and economic development with 6.5% GDP growth in FY2025.

- Banking sector performance grew steadily with credit growth aligning with deposit growth, while scheduled commercial banks improved profitability, evidenced by declining gross non-performing assets and a higher capital-to-risk weighted asset ratio.

- RBIs Financial Inclusion Index rose significantly from 53.9 in March 2021 to 64.2 in March 2024, driven by government-backed infrastructure financing

- Indian stock markets reached new highs by Dec 2024, outperforming other emerging markets despite global uncertainties. Market growth was fuelled by strong macroeconomic fundamentals, healthy corporate earnings, supportive institutional investment and robust SIP inflows (35% up YoY).

Outlook

Indias financial sector has demonstrated strength midst challenging geopolitical conditions, showcasing robust performance across banking, capital markets, insurance, and pensions. System liquidity remains in surplus, while banks exhibit strong financial health, evidenced by narrowing credit-deposit growth gaps and improved profitability.

Indian NBFC Industry

India, as one of the fastest growing and largest economies globally, presents a conducive environment for the expansion of its credit market. The total NBFC credit outstanding stood at approximately 52 trillion as of December 2024 and is projected to cross 60 trillion by FY2026, reflecting the sectors continued expansion. Amongst banks, NBFC and All India Financial Institutions, NBFCs have maintained 21-24% share of credit from FY2017 to FY2024. As India targets becoming a $5 trillion economy in the coming years, the demand for financing is set to increase, underscoring the vital role of NBFCs in supporting economic growth and development.

Over the years, NBFCs have significantly strengthened their balance sheets, marked by reduced leverage and improved asset quality, with a notable shift towards the retail segment. NBFCs are effectively utilising digital data to improve credit assessments and operational efficiency. The interest of equity investors remains strong and there is vast pool of debt capital overseas which is largely untapped. With such a stable foundation, the sector remains well-positioned to navigate the evolving regulatory environment while maintaining momentum.

The NBFC sector, especially the Base Layer entities, continued to play a vital role in reaching underbanked and unbanked segments. Increased digital penetration and regulatory focus on governance and risk-based supervision have shaped the operating environment.

Key Regulatory Developments in the NBFC Industry

1. Scale-Based Regulation (SBR): The RBI continued to implement and strengthen its four tier classification for NBFCs Base, Middle, Upper and Top Layer - based on their asset size, systemic importance and business operations in FY2025. This framework aimed to mitigate regulatory arbitrage, strengthen financial stability and ensure that NBFCs are subject to appropriate levels of supervision and compliance requirements.

2. Guidance Note on Operational Risk Management & Operational Resilience: On 30th April 2024, the Reserve Bank of India (RBI) released an updated Guidance Note on Operational Risk Management and Operational Resilience. The guidelines bring the Basel Committee on Banking Supervision (BCBS) Principles and international best practices into line with RBI rules.

Outlook

Indias NBFC sector is poised for sustained growth, supported by a thriving economy, robust balance sheets, and diverse portfolio offerings. Its resilience, adaptability, and niche focus on last-mile credit delivery remain key strengths, enabling it to drive significant contributions to Indias economic development. With healthy liquidity and stronger balance sheets, the sector is well positioned to meet rising retail credit demand. Indias GDP, projected to grow at an average of 6.7% between FY2025 and FY2031, will offer additional tailwinds to the sectors growth trajectory.

RISK MANGEMENT

The very nature of the Companys business makes it susceptible to various kinds of risks. The Company encounters market risk, credit risk and operational risks in its daily business operations. The Company has framed a comprehensive Risk Management Policy which inter-alia lays down detailed processes and policies in various facets of the risk management function. Such comprehensive framework helps the company to minimize adverse impact of risks and also enable to leverage market opportunities.

Risk management practices seek to sustain and enhance short & long-term competitive advantage to the Company. It is integral to our business model, described as the “Practicable, Sustainable, Profitable and De-risked” (PSPD) model. Our core values and ethics provide the platform for our risk management practices.

NON-BANKING FINANCE COMPANY (NBFC) INDUSTRY & BUSINESS UPDATE:

NBFCs has always been an important component of the financial sector and has seen higher credit growth over the past few years. The NBFC sector in India is expected to grow due to several factors like governments commitment to financial inclusion, sectors digital transformation, regulatory changes that aim to ensure the sectors stability and prevent excessive risk-taking and also due to impressive growth projections.

With strategic moves by industry leaders, the market is set to expand further. NBFCs are leveraging their superior understanding of regional dynamics and customized products and services to expedite financial inclusion in India. Lower transaction costs, quick decision making, customer orientation and prompt service standards have typically differentiated NBFCs from banks. NBFCs have demonstrated agility, innovation, and frugality to provide formal financial services to millions of Indians

India is projected to become the worlds fourth-largest economy by 2025, surpassing Japan, according to the IMF. This marks a major milestone, as the country climbs from 10th place in 2014 to 4th in just 11 years a 105% nominal GDP growth during the period, with India becoming a $4 trillion economy.

The challenges plaguing the NBFC sector extend well into 2025. Experts are talking of consolidation, capital raising, and profitability pressures in 2025.

RBI has prescribed Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs requiring NBFCs to Top up their Net Owned funds to not less than Rs.5 Crores by 31.03.2025 and to not less than Rs.10 Crores by 31.03.2027 putting additional strains on their operations. Your company has achieved the target. Non-Banking Financial Companies.

SEGMENT WISE/ PRODUCT WISE PERFORMANCE

As the Company is in only one line of business, product wise and/or segment wise disclosure of performance is not required to be made.

DISSCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

The financial statements have been prepared in accordance with the requirements of the Companies Act, 2013 and applicable accounting standards issued by the Institute of Chartered Accountants of India. The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Accounts and other financial statements forming part of this annual report.

RISK MANAGEMENT & GOVERNANCE

Responsible for managing overall ERM, Internal Control, Compliance and Assurance activities.

Co-ordinating with Internal Auditors & Functional Head for timely execution of Audit & compliance of Audit observation.

Work with Business Management Group (BMG) of respective locations for process efficiency & productivity improvements.

Ensure effective implementation of Standard Operating Procedure & Policies.

Conducting management Audit & Special Audit as assigned by the Management/Audit Committee.

Conducting Self-Assessment Survey for all Business Verticals.

FINANCIAL SERVICES -NBFC SECTOR

NBFCs have become a key component of Indias financial sector, outpacing scheduled commercial banks (SCBs) in credit growth in recent years. With their deep regional knowledge, efficient collection systems, and customer-focused services, NBFCs have been instrumental in driving financial inclusion. Their low transaction costs, quick decision-making, and personalized offerings differentiate them from banks, positioning them well to bridge the financing gap in India.

Over the past decade, NBFCs have grown significantly, now representing over a quarter of the balance sheet size of banks. This growth has prompted the RBI to increase regulatory oversight of larger NBFCs, as outlined in its 2021 framework aimed at addressing potential systemic risks while fostering further development in the sector.

The COVID-19 pandemic tested the resilience of NBFCs, particularly due to the lack of relief on liabilities, unlike banks.

However, those that maintained strong liquidity were able to navigate the crisis successfully. Despite previous challenges like demonetization, GST implementation, and the failure of a major NBFC, the sector has demonstrated its resilience. With stronger capital adequacy, improved margins, and lower NPAs, the NBFC sector is poised for growth in the post-pandemic period, with the RBIs revised framework further enhancing its resilience.

KEY FINANCIAL RATIOS:

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an adequate system of internal controls to ensure accuracy of accounting records, compliance with all laws and regulations and compliance with the rules, procedures and guidelines prescribed by the management. An extensive internal audit is carried out by independent firm. Post audit reviews are also carried out to ensure follow up on the observations made.

Ratios	Numerator	Denominator	31-Mar- 25	31-Mar- 24	% Change during the year	Remarks
Current Ratio	Current Assets	Current Liabilities	1.94	3.29	-41.06	Change is due to decrease in current liabilities
Debt-Equity Ratio	Total debt	Equity shareholders funds	N.A	N.A.	N.A.	-
Debt-Service Coverage Ratio	EBIT	Debt service	N.A.	N.A.	N.A.	-
Return on Equity Ratio	Profit After Taxes	Average shareholders funds	0.02	0.02	15%	Change is due to increase in profit after tax
Inventory Turnover Ratio	Cost of goods sold or sales	Average inventory	N.A.	N.A.	N.A.	-
Trade Receivables Turnover Ratio	Credit sales	Average trade receivables	N.A.	N.A.	N.A.	-
Trade Payables Turnover Ratio	Purchase of goods and services	Average trade payables	N.A.	N.A.	N.A.	- Change is due to decrease in
Net Capital Turnover Ratio	Revenue from operations	Average Working Capital	2.67	1.15	131%	current assets resulting in decrease in average working capital Change is due to
Net Profit Ratio	Net profit	Revenue from operations	0.50	0.44	12%	increase in Net Profit during the year
Return on Capital Employed Return on Investment	Earnings before interest and taxes Income generated from invested funds	Capital employed Average invested funds	0.02 N.A.	0.03 N.A.	-8% N.A.	- -

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the companys objectives, projections, estimates and expectations may be “forward-looking statements” within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied depending on the economic conditions, government policies and other incidental factors which are beyond the control of the management. The Company is not under any obligation to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments, information or events.