Shriram Finance Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

In 2024, the global economy achieved a growth rate of 3.2%, refecting a measured pace of expansion. Nonetheless, this fgure fell short of the historical average of 3.7% recorded from 2000 to 2019. e deceleration was attributed to a confuence of both structural and cyclical factors, including policy tightening in major economies, geopolitical instability, and sector-specifc challenges. Together, these elements exerted a profound impact on both advanced and emerging markets, leading to a more subdued global economic environment.

e economic performance of both advanced and emerging economies followed distinctly diferent trajectories throughout the year. Advanced economies struggled with weak manufacturing activity, faltering consumer confdence, and persistent infationary pressures, all of which impeded broader economic growth. Rising energy costs, disruptions in global trade fows, and the continued impact of prior monetary tightening further constrained demand. In contrast, emerging markets and developing economies encountered their own set of challenges, including subdued external demand, capital outfows driven by rising interest rates in developed nations, and considerable policy uncertainties. Additionally, trade disruptions and geopolitical tensions significantly contributed to the moderation of growth, particularly in economies heavily reliant on exports. Despite these challenges, certain emerging markets showed strength, supported by strong domestic consumption and targeted fscal stimuli.

While infationary trends varied across diferent economies, global headline infation showed a significant decrease in 2024, falling from 5.7% in 2023 to 4.2%. is drop was primarily driven by the stabilisation of energy prices and the gradual resolution of ongoing supply chain challenges. roughout the year, central banks maintained a cautious approach, carefully balancing monetary policy to support economic recovery while ensuring infation remained on a downward trajectory. Looking ahead, infation is expected to continue its moderation, potentially reaching 3.5% by 2026, provided geopolitical risks and supply-side shocks remain under control.

Performance of Major Economies in CY 2024

e U.S.: e U.S. economy proved resilient in 2024, supported by a strong labour market and sustained consumer spending. However, the persistence of higher interest rates exerted pressure on business investment and credit growth.

As infationary pressures receded, the Federal Reserve was able to adopt a judicious and well-calibrated policy approach. Euro Area: e Euro area faced a more restrained economic climate, struggling with feeble industrial output, tepid domestic demand, and the lingering effects of high borrowing costs. Ongoing inflationary pressures and fluctuations in energy prices further impeded the regions growth prospects. China: Chinas economy registered a growth rate of 5.0% in 2024, aligning with the governments target. is growth was primarily driven by industrial output and robust export activity, although domestic consumption remained subdued, constrained by prevailing uncertainties among the workforce. e global trade environment in 2024 remained precarious, marred by rising protectionism, geopolitical strife, and shifting trade alliances. Disputes between the United States and China, coupled with tariffs and export restrictions, severely disrupted global supply chains. Meanwhile, near shoring and friend-shoring initiatives introduced new complexities and logistical challenges. Geopolitical tensions, including the ongoing war in Ukraine and regional instability, further fuelled economic uncertainty and market volatility. Oil prices were projected to dip by 2.6% in 2025, driven by weakening demand in China and an increase in non-OPEC+ supply, although geopolitical risks could upend this outlook. Commodity-exporting nations, in particular, faced increased vulnerability as shifts in trade patterns and disruptions to supply chains undermined economic stability.

In 2024, financial markets displayed a range of mixed trajectories, with advanced economies experiencing rallies in equity markets, while emerging markets contended with heightened volatility, primarily due to capital outflows and the upward trajectory of the US dollar. Persistent infationary trends and shifing expectations regarding interest rates remained central to investor sentiment, with protracted policy tightening posing significant risks to both economic expansion and capital investment. Nations that embraced sound economic policies and fostered strong global collaboration appeared better positioned to weather the prevailing uncertainties and maintain economic vitality. In the face of ongoing adversities, the global economy in 2024 exhibited considerable resilience, driven by nimble trade strategies and a moderating infationary trend. While financial instability and geopolitical tensions continued to present challenges, well-calibrated policy measures and diversified economic strategies played a key role in mitigating risks. e year highlighted the paramount importance of adaptability, sound governance, and international cooperation in maintaining growth amid a rapidly changing global environment.

Road Ahead

As we look towards the future, the IMF projects global growth to stabilise at 3.3% in both 2025 and 2026. However, numerous risks persist, particularly emanating from policy uncertainties, trade tensions, and deep-rooted structural challenges in key economies. While the decline in infation ofers some respite, the long-term sustainability of growth will depend on the adoption of efective policy measures, profound structural reforms, and collaborative international eforts to navigate the changing economic landscape. Ensuring robust economic resilience and fostering inclusive growth will be crucial for sustaining stability in the coming years.

(Source: https://www.imf.org/en/Publications/WEO/Issues/2025/01/17/ world-economic-outlook-update-january-2025, https://businesseconomics. in/imf-world-economic-outlook-january-2025-%E2%80%93-analysisreview. https://apnews.com/article/imf-tarif-trump-economic-growth-07f3afdcd1d9 c0df5c02c9c47a13f264)

INDIAN ECONOMIC OVERVIEW

Indias economic performance in FY 2024-25 refects a consistent and robust growth trajectory, with the nations Gross Domestic Product (GDP) growing by 6.5%, thereby solidifying its status as the fastest-growing major economy. is growth is primarily driven by substantial government investment in infrastructure, a resurgence in rural demand driven by a thriving Kharif crop, and the sustained expansion of the services sector, notably in fnance and real estate. e Reserve Bank of Indias prudent, accommodative monetary policy, which includes an interest rate reduction, has further spurred both investment and consumption. In addition, a marked improvement in manufacturing output and resilient urban consumption have further invigorated the economic momentum. While global trade uncertainties remain an external risk, Indias intrinsic economic strength, coupled with policy interventions and robust private sector investments, is set to underpin continued growth.

GDP Growth (in %)

FY 2020-21	FY 2021-22	FY 2022-23	FY 2023-24	FY 2024-25
(6.6)	8.7	7.0	7.2	6.5

Sector-wise Performance in FY 2024-25

Agriculture and Allied Sectors: e agricultural sector experienced a significant revival with a 4.6% growth in FY 2024-25, emerging from a period of subdued performance. Benefcial monsoon conditions have led to a bumper Kharif crop harvest, driving rural income growth and fuelling increased demand. In parallel, government-led initiatives focussed on empowering farmers and advancing agricultural infrastructure have further reinforced the sector, fostering a foundation for continuous growth and resilience.

Industrial Sector: e industrial sector recorded a GDP growth of 6.1% in FY 2024-25, propelled by substantial progress in construction and key utility sectors, including electricity, gas, and water supply. e manufacturing segment, in particular, has shown resilience, with increased output across key industries, further strengthening the overall industrial performance.

Services Sector: With its continued dominance in Indias GDP, the services sector grew at a pace of 7.2% in FY 2024-25, driven by fnancial, real estate, and professional services. In parallel, trade, transport, and communication services saw a growth of 6.4%, refecting an uptick in both economic momentum and consumer-driven demand.

Construction Sector: e construction sector recorded a growth of 9.4% in FY 2024-25, largely driven by extensive infrastructure development and an increase in investments. Government allocations to key projects have played a critical role in stimulating employment, while also fostering growth in related industries.

In a significant development, Indias infation slowed to its lowest level in nearly six years, with retail infation eased to 3.16% in April 2025, remaining below the RBIs 4% target for the third consecutive month, as food prices rose at a slower pace. e easing infation also signals improving supply-side dynamics, particularly across food and core components, further reinforcing the outlook for sustained economic momentum. In its June 6, 2025 policy review, the RBI executed a 50 bps repo rate cut, bringing the rate down to 5.50%, and simultaneously trimmed the Cash Reserve Ratio (CRR) by 100 bps, injecting nearly INR 2.5 Trillion of liquidity into the banking system. is front-loaded easing, building on earlier cuts of 25 bps in February and April, signals a decisive pivot to rejuvenate growth. e policy stance has shifed from "accommodative" to "neutral," refecting a strategic pause, even as the central bank signals readiness to act further if conditions warrant. With infation frmly under control and ample liquidity, these measures aim to stimulate lending (especially to MSMEs and retail borrowers), support credit transmission, and fortify the broader economic recovery amid external uncertainties.

e Union Budget FY 2025–26 reinforced the governments commitment to sustainable growth while maintaining fscal discipline. Capital expenditure was raised to an unprecedented INR 11.21 Lakh Crores (~3.1% of GDP), underscoring a strategic focus on infrastructure, rural uplifment, and catalyzing private sector investment. e fscal defcit target was further trimmed to 4.9%, demonstrating prudent budget management. A major boost came from the RBIs record dividend transfer of INR 2.69 Lakh Crores, substantially above the budgeted INR 2.56 Lakh Crores, which creates roughly INR 70,000 Crores of extra fscal room. is contribution alone could lower the defcit by 20–30 bps, potentially bringing it near 4.2% of GDP, or alternatively, enabling enhanced capital spending on key priorities, all while preserving fscal prudence.

Consumption revival remained a key policy focus, with higher allocations to rural fagship schemes, enhanced Direct Beneft Transfers (DBTs), and tax relief under the new income tax regime efected to achieve intended outcome. ese steps are expected to strengthen disposable income and boost consumption recovery, particularly among rural and middle-income households.

Road Ahead

e Indian economy is projected to experience a growth rate ranging from 6.3% to 6.8% in FY 2025-26, driven by transformative structural reforms, digital evolutions, and a rising wave of consumer demand. Initiatives such as Make in India and the Production-Linked Incentive (PLI) schemes are strengthening the manufacturing sector, channelling significant investments into key sectors like electronics, semiconductors, and renewable energy.

In parallel, large-scale infrastructure projects—spanning highways, ports, and smart city developments—are expected to enhance economic activity and generate substantial employment prospects. With continued policy support and strategic investments, India is well-positioned to sustain its growth trajectory, solidifying its role as a global economic powerhouse.

(Source: https://pib.gov.in/PressReleasePage.aspx?PRID=2098447&utm, https://www.reuters.com/world/india/indias-central-bank-delivers-frst-rate-cut-nearly-5-years-2025-02-07/, https://www.f.com/content/ace560e2-794c-4621-a57c-cc828c6f91e4, https://pib.gov.in/PressReleaseIframePage. aspx?PRID=2098353&utm, https://www.reuters.com/world/india/ indias-economic-growth-picks-up-rising-government-consumer-spending-2025-02-28, https://www2.deloitte.com/us/en/insights/economy/ asia-pacifc/india-economic-outlook)

INDIAN FINANCIAL SERVICES SECTOR OVERVIEW

Indias financial services sector has adeptly navigated a fuctuating environment, infuenced by evolving monetary policies and shifing global dynamics. e Reserve Bank of India (RBI) initiated a cycle of monetary easing, reducing key policy rates to stimulate economic growth. Despite this, banks struggled with higher borrowing costs, exacerbated by the rising demand for infrastructure bonds. As of February 2025, the liquidity shortfall had escalated to approximately Rs. 1.7 Trillion. To counterbalance this, the RBI intervened with a USD 10 Billion forex swap, designed to stabilise short-term interest rates and ensure financial equilibrium.

e sectors transformation was further strengthened by rapid technological advancements. e advent of Artifcial Intelligence (AI), Open Banking, and digital currencies has become pivotal in refning financial services. e introduction of the Digital Rupee marked a significant step towards a fully cashless economy. AI-driven innovations enhanced both customer experience and risk management, while Open Banking paved the way for broader financial inclusion. Simultaneously, the insurance industry adapted to emerging risks, with health insurers in Delhi considering premium adjustments due to the increasing prevalence of air pollution-related health issues.

However, the sector continues to face challenges, including rising levels of unsecured lending and an increase in credit card delinquencies, particularly among younger demographics. e recent interest rate cuts have also placed additional pressure on banks net interest margins. Despite these obstacles, Indias financial services sector remains well-positioned for sustained growth and long-term resilience, supported by proactive regulatory measures, robust digital infrastructure, and a persistent commitment to financial inclusion.

(Source: https://www.reuters.com/world/india/indias-rbi-announces-mega-10-billion-fx-swap-infuse-rupee-liquidity-2025-02-21/, https:// economictimes.indiatimes.com/industry/banking/fnance/insure/ insurance-companies-look-to-hike-health-premiums-as-pollution-stings/ articleshow/118445289.cms?from=mdr)

INDUSTRY SCENARIO AND FINANCING

e Non-Banking Financial Companies (NBFC) sector continues to serve as an indispensable pillar in Indias financial framework, playing a pivotal role in enhancing financial inclusion and broadening access to credit. As of FY 2024-25, the sector has expanded to approximately USD 350 Billion, marking a consistent increase from the previous years USD 326 Billion. However, the growth of the sectors Assets Under Management (AUM) is forecasted to moderate, with year-on-year growth projections for FY 2024-25 and FY 2025-26 ranging between 15-17%, a decline from the robust 23% recorded in FY 2023-24. is deceleration is attributed to mounting challenges such as rising delinquencies, intensifed regulatory frameworks, and tighter funding conditions. Despite these obstacles, essential lending verticals, including SME fnancing, loans against property (LAP), and used vehicle fnancing, are poised to continue their growth trajectory, demonstrating the sectors resilience in the face of adversity.

Regulatory and Market Dynamics

Regulatory reforms continue to reshape the NBFC landscape, with the Reserve Bank of India (RBI) implementing scale-based regulations to enhance governance, risk management, and operational stability. e focus on diversifying funding sources to reduce reliance on traditional banking channels has become more critical in ensuring liquidity and financial health. Additionally, the sector faces increasing competition from traditional banks and fntech players, necessitating strategic realignments to maintain market relevance. e RBIs emphasis on prudent lending practices, particularly in unsecured loan segments, highlights the need for NBFCs to strengthen their risk assessment frameworks and financial prudence.

Technological Advancements and Emerging Opportunities

Digital transformation remains a key growth enabler for NBFCs, with the adoption of AI-driven credit assessments, digital lending platforms, and data-driven risk management significantly enhancing efciency and customer accessibility. e governments push for financial inclusion, along with initiatives like PMJDY and Mudra Yojana, further supports the sectors expansion into underserved markets. Meanwhile, co-lending partnerships with banks and increased Foreign Direct Investment (FDI) are providing access to low-cost capital, strengthening financial sustainability. While challenges such as regulatory compliance, competition from banks and fntechs, and macroeconomic uncertainties persist, NBFCs that leverage technology, diversify funding sources, and strengthen risk management frameworks will be well-positioned for sustainable growth. e sectors ability to innovate and adapt will ultimately determine its long-term success in Indias evolving financial landscape.

(Source: https://www.business-standard.com/fnance/news/nbfc-s-assets-growth-to-sharply-decline-to-15-17-in-fy25-and-fy26-124120200402f1. html, https://www.businessworld.in/article/nbfcs-growth-to-remain-under-pressure-report-540653, https://www.tribuneindia.com/news/business/ outlook-2025-leveraging-tech-and-policy-alignment-to-drive-nbfc-growth/)

Commercial Vehicle (CV)

e Indian commercial vehicle (CV) sector in FY 2024-25 presents a mixed landscape, shaped by both growth opportunities and market challenges. Retail sales have shown an upward trend, recording an 8.22% year-on-year (YoY) growth in January 2025. However, wholesale volumes have faced a slowdown, declining by 3.2% YoY. Medium and Heavy Commercial Vehicles (M&HCVs) are expected to reach peak production levels of nearly 550,000 units, supported by infrastructure development and government policies like the vehicle scrappage programme. On the other hand, Light Commercial Vehicles (LCVs) are witnessing stagnation or slight declines due to a high base efect and rising competition from electric three-wheelers. Meanwhile, the bus segment is experiencing strong momentum, with an estimated 8-11% growth, driven by increased demand for public transport modernisation.

e sectors future trajectory remains positive, with infrastructure investments, replacement demand, and growth in key industries such as coal, steel, and cement acting as strong tailwinds. However, challenges such as rising commodity costs, policy fuctuations, and funding constraints pose hurdles to sustained expansion. e market is estimated to reach USD 51.09 Billion in 2025, registering a CAGR of 5.36%. Additionally, the push for sustainable mobility is driving a gradual transition towards electric commercial vehicles, supported by government incentives and environmental considerations. While short-term volatility persists, the sector is well-positioned for long-term growth, driven by supportive policies and economic momentum.

(Source: https://trucks.cardekho.com/en/news/detail/fada-commercial-vehicle-retail-sale-reports-8-22-yoy-sales-growth-in-january-2025-2765. html, https://www.motorindiaonline.in/indian-mhcv-production-to-reach-new-all-time-high-in-2025/, https://www.cnbctv18.com/auto/auto-sector-2025-outlook-electric-vehicles-scooters-cars-19530238.htm, https:// blog.91trucks.com/the-future-of-commercial-vehicles-in-india-trends-and-insights-for-2025/)

Passenger Vehicle (PV)

e Indian passenger vehicle (PV) market is experiencing a period of moderate growth, infuenced by a complex interplay of evolving consumer preferences, economic factors, and technological advancements. In FY 2025, the sector achieved an all-time high in sales, registering a 2.0% year-on-year increase to approximately 43 lakh units. However, this growth has been tempered by the high base efect from the preceding years. Sports Utility Vehicles (SUVs) continue to lead the market, driven by strong consumer interest and a wave of new product introductions. Additionally, favourable government policies and a stable macroeconomic backdrop have reinforced consumer confdence, sustaining demand despite infationary pressures and rising borrowing costs. at said, the competitive intensity within the sector remains formidable, leading to significant pricing pressures and the imperative for continuous innovation to maintain market dominance.

Looking ahead, the passenger vehicle market is poised to reach a remarkable valuation of USD 300 billion by 2026, driven by escalating income levels, urbanisation trends, and an increasing middle class with enhanced purchasing capacity. e electric vehicle (EV) segment, in particular, is expected to emerge as a primary growth catalyst in the coming years, fuelled by investments in EV technology and the expansion of necessary infrastructure. Nonetheless, challenges such as limited charging infrastructure and afordability issues continue to pose barriers to mass adoption. Additionally, the increasing integration of digitalisation within the sector is redefning sales, marketing, and customer engagement, with manufacturers utilising online platforms to drive growth. Despite short-term challenges, the long-term growth trajectory remains positive, underpinned by robust demand in the SUV segment and the accelerating pace of electrifcation.

(Source: https://economictimes.indiatimes.com/industry/auto/auto-news/ indias-passenger-vehicle-industry-to-see-modest-1-5-growth-in-fy25-report/ articleshow/117910001.cms, https://www.siam.in/pressrelease-details. aspx?mpgid=48&pgidtrail=50&pid=576, https://www.cnbctv18.com/auto/ auto-sector-2025-outlook-electric-vehicles-scooters-cars-19530238.htm)

Two-Wheeler (2W)

e Indian two-wheeler market is navigating a phase of sustained expansion and transformation, driven by evolving consumer demands, rapid technological advancements, and strategic policy initiatives. In FY 2025, the sector saw a robust growth of more than 9%, with significant contributions from internal combustion engine (ICE) motorcycles, scooters, and electric vehicles (EVs). ICE two-wheelers retain their dominance with an 88% market share, benefting from a mature infrastructure and price competitiveness. However, the electric vehicle segment is swifly gaining ground, with retail sales soaring by 33% in FY 2025, and future forecasts predicting a 21% CAGR from FY 2025 to FY 2029. Rising consumer interest in premium features, eco-friendly urban mobility options, and government-backed incentives for EV adoption are further accelerating growth, making the two-wheeler industry a cornerstone of Indias transportation transformation.

Looking ahead, the market is expected to grow at a more tempered rate of 2-4% in FY 2025, infuenced by the high base efect of previous years. While the electric two-wheeler market continues to expand, challenges such as insufcient charging infrastructure and ferce competition from both established industry players and new entrants continue to pose challenges. e future of the sector will be steered by ongoing technological innovations, including the integration of smart connectivity, enhanced safety features, and performance optimisations. With government policies facilitating electrifcation and urbanisation, the sector is set for sustained long-term growth, contingent on addressing infrastructure gaps and maintaining a strong emphasis on innovation.

(Source: https://timesofndia.indiatimes.com/business/india-business/ two-wheeler-industry-races-15-17-ahead-moderate-growth-of-2-4-seen-in-2025-from-a-high-base/articleshow/117109407.cms, https://www. mordorintelligence.com/industry-reports/india-two-wheeler-market, https:// www.manufacturingtodayindia.com/indias-e2w-in-2024-the-comeback-of-the-legacy-players)

Tractor and Farm Equipment

e Indian tractor and agricultural machinery sector experienced a pronounced recovery in FY 2024-25, driven by favourable climatic conditions, progressive government policies, and technological innovations. While tractor sales witnessed a decline of 1.5% in 2024, primarily due to subdued demand in the frst half of the year, a robust rebound in the second half has resulted in a 5% year-on-year growth from April to December. In January 2025, domestic tractor sales increased by 11.31%, refecting an uptick in demand driven by timely monsoons, enhanced crop acreage, and the accelerating trend of farm mechanisation. Furthermore, government-backed initiatives, including subsidy schemes and tax incentives, are propelling sectoral growth, while cutting-edge technologies like GPS-integrated tractors and precision farming solutions are enhancing operational efciency and cost-efectiveness.

e Indian agricultural tractor market, valued at USD 7.42 million in 2023, is set to expand significantly, with projections suggesting a compound annual growth rate (CAGR) of 6.70% through to 2032, culminating in an estimated value of USD 11.68 million. Tractor sales are expected to rise in the coming years with the northern regions of India leading the charge due to their high levels of mechanisation, while the Western and Southern regions are also poised to make substantial contributions. Additionally, the sector is witnessing an increasing focus on sustainability, with a shif towards environmentally friendly tractors featuring lower emissions, refecting global agricultural trends. As the market embraces greater technological integration, overcoming challenges such as intense market competition and infrastructure defciencies will be crucial to ensure continued growth and long-term prosperity.

(Source: https://www.business-standard.com/markets/news/tractor-sales-fall-1-5-to-901-668-units-in-2024-amid-weak-h1-demand-125012600607f1. html, https://www.tractorjunction.com/tractor-news/domestic-tractor-sales-report-jan-2025/, https://www.datainsightsmarket.com/reports/india-agricultural-tractor-market-842)

Construction Equipment

e Indian construction equipment market is on an upward trajectory, supported by government-led infrastructure projects and the integration of modern technologies. With an estimated market size between USD 10 billion and USD 14.3 billion in 2024, the sector has seen a 32% jump in sales from H1 2022 to H1 2024, marking the highest growth in three years. Initiatives such as Bharatmala, Sagarmala, and the Smart Cities Mission have stimulated demand, while exports have grown significantly—from 4,139 units in H1 2022 to 7,348 units in H1 2024. e use of advanced technologies, particularly automation and telematics, is improving both productivity and operational efciency across a variety of equipment.

Looking ahead, the Indian construction equipment market is projected to attain a valuation of USD 29.5 Billion, clocking in a CAGR of 11.91% from FY 2024-25 to FY 2031-32. Despite this promising outlook, the industry faces several challenges, including market fuctuations caused by factors like the Model Code of Conduct and prolonged monsoons, leading to a subdued 3% year-on-year growth in H1 FY 2024-25. Segment-wise, earthmoving equipment has shown modest growth, while material handling machinery has witnessed a decline. As the industry transitions towards sustainable solutions, the adoption of electric and hybrid models is expected to gain traction, ensuring long-term efciency and environmental sustainability.

(Source: https://indianinfrastructure.com/2025/02/05/growth-revival-promising-outlook-for-construction-equipment-sales/, https://infra. tractorjunction.com/en/news/construction-equipment-industry-records-highest-h1-growth-in-3-years, https://timesofndia.indiatimes.com/business/ india-business/construction-equipment-industry-clocks-highest-h1-growth-in-three-years/articleshow/115937338.cms)

Micro, Small and Medium Enterprises (MSMEs)

e Indian MSME sector continues to exhibit strong growth supported by favourable government policies, rising exports and improved access to credit. MSMEs have played a crucial role in Indias export performance, with MSME exports growing from Rs. 3.95 Lakh Crores in FY 2020-21 to Rs. 12.39 Lakh Crores in FY 2024-25, highlighting their increasing global presence. Additionally, the sector witnessed significant expansion, 5.93 Crore MSMEs registered on the Udyam Portal as of 4th February, 2025, including 5.84 Crore micro enterprises. e governments decision to revise the MSME classifcation criteria in the Union Budget 2025, increasing investment limits is expected to further support business scalability while retaining the benefts associated with the sector.

e sectors growth trajectory will be shaped by continued government initiatives such as increased credit guarantees, special credit cards for small businesses and expanded procurement support. Public sector procurement from micro and small enterprises (MSEs) reached Rs. 71,560 Crores, benefting 2.02 Lakh MSEs as of April 2024. However, challenges such as limited credit accessibility, infrastructure bottlenecks, and competitive global markets persist. With MSMEs contributing nearly 30% to Indias GDP and accounting for 40% of the countrys exports, sustained policy support and investment in infrastructure will be crucial in maintaining their growth momentum and fostering long-term resilience in the sector. e MSME sector also plays a vital role in employment generation, providing livelihoods to millions across urban and rural India. With its contribution to nearly 45% of the countrys total manufacturing output, the sector remains a backbone of industrial development. e increasing digitalisation of MSMEs, driven by fntech solutions and e-commerceplatformsisfurtherenhancingtheirmarketreach and operational efciency. Additionally, the rise of sustainable and green manufacturing practices within MSMEs is gaining traction, aligning with global environmental standards and enhancing their competitiveness in international markets. Strengthening digital infrastructure, skill development programmes and technology adoption will be key to unlocking the full potential of the sector in the coming years.

(Source: https://pib.gov.in/PressReleasePage.aspx?PRID=2099687, https:// www.jmfnancialservices.in/market-news-and-insights/1568725, https:// pib.gov.in/PressReleasePage.aspx?PRID=2087361, https://pib.gov.in/ PressReleasePage.aspx?PRID=2089308)

Gold Loan

e landscape of the Indian gold loan market is undergoing a paradigm shif, with a growing trend of urban and semi-urban consumers opting for gold-backed credit fnancing solutions. Traditionally dominated by rural borrowers and small-scale businesses, the sector is now witnessing an increasing adoption among salaried professionals and self-employed individuals to address their immediate liquidity needs. e convenience of gold loans, facilitated by minimal paperwork and rapid approval processes, has contributed significantly to their rising popularity. Furthermore, the advent of digitalisation has played a key role in enhancing the efcacy of loan applications and disbursements, thereby broadening access through online channels and mobile apps. Additionally, NBFCs are concentrating their eforts on product innovation to cater to an increasingly diverse customer demographic. New gold loan products, featuring fexible repayment schedules, reduced interest rates, and enhanced loan-to-value (LTV) ratios, are being introduced to appeal to a wide array of borrowers. e growing trend of digital gold loans, which allows customers to electronically pledge their gold, is reshaping the landscape of the industry. Additionally, synergies between fntech companies and conventional lenders are enhancing the customer experience by ofering streamlined loan processes and real-time valuation of gold assets.

Although the sector has demonstrated significant growth, it continues to contend with obstacles like regulatory tightening and the inherent volatility of gold prices. e Reserve Bank of Indias intensifcation of regulatory supervision has enforced stricter compliance protocols for lenders, thereby promoting transparency and fostering equitable lending practices. Additionally, fuctuations in gold prices present a double-edged sword: rising valuations encourage greater loan disbursements, yet price declines may expose lenders to amplifed risks.

(Source: https://www.icra.in/CommonService/OpenMediaS3?Key=7f642d7-e321-4652-b4e6-1bf0a56c7433, https://timesofndia.indiatimes.com/ business/india-business/gold-loans-grow-over-50-in-seven-months/ articleshow/115826247.cms)

COMPANY OVERVIEW

Shriram Finance Limited (hereinafer referred to as ‘Shriram Finance or ‘the Company) stands as a preeminent force within Indias retail fnance sector, distinguished for its dominance in the organised fnancing of pre-owned commercial vehicles and two-wheelers. Founded upon a consistent base of customer confdence and a vertically integrated operational framework, the Company extends its fscal acumen across diverse domains, encompassing passenger vehicles, construction and agricultural machinery, MSME fnancing, gold-backed loans, personal credit, and working capital solutions.

With a vast and growing customer base of over 95.56 Lakhs individuals and an extensive network of 3,220 branches across India, the Company continues to redefne financial inclusion. As of March 31, 2025, the Company recorded an impressive AUM of Rs. 263,190.27 crores, further solidifying its market leadership.

In a defning strategic manoeuvre, Shriram Finance had approved the divestment of its housing fnance subsidiary, Shriram Housing Finance Limited (SHFL), to Warburg Pincus, a global leader in growth investing. e transaction, valued at Rs. 4,630.00 crores, saw Warburg Pincus, via its afliate Mango Crest Investment, acquire the combined stakes of SFL and its private equity partner, Valiant Partners LP (Mauritius). is decision marks a key moment for both SFL and SHFL, empowering them to pursue independent growth paths, while maximising value for their stakeholders. As SFL transferred control and Valiant exited its investment, SHFL (now renamed as Truhome Finance Limited) is set to enter a new era under Warburg Pincus leadership, driven by fresh capital and the strategic expertise necessary to propel its expansion.

Key Highlights, FY 2024-25

Please fnd below the segment–wise Assets Under Management (AUM) of the Company as of March 31, 2025

(Rs. in crores)

	March 31, 2025
Commercial vehicles	118,560.50
Passenger vehicles	54,104.49
Construction equipment	17,878.16
Farm equipment	5,206.60
MSME	37,413.55
Two-wheelers	15,580.56
Gold loans	4,836.70
Personal loans	9,609.71
Total	263,190.27

• Delivered strong growth in FY 2024-25, driven by robust performance across MSME loans, two-wheeler loans, farm equipment loans, and passenger vehicle loans

• Strengthened financial performance with a healthy Net Interest Margin (NIM) of 8.55%

• Enhanced funding stability by securing fresh long-term borrowings with extended tenures

• Reinforced credit fundamentals, refected in improved credit ratings from multiple rating agencies

• Achieved higher collection efciency and better asset quality through an upgraded collection framework and expanded network reach

• Intensifed focus on digital lending by strengthening technology platforms and leveraging emerging digital opportunities

SWOT ANALYSIS

Strengths

Market Leadership: A dominant player in the domain of pre-owned commercial vehicle fnancing, with a strong presence in MSME lending, two-wheeler loans, gold loans, and personal fnance solutions.

Robust Distribution Network: A far-reaching and well-established network, spanning semi-urban and rural markets across India, efectively reaching diverse customer segments. Customer-Centric Model: A deep-rooted understanding of client needs, founded on trust and sustained relationships.

Strong Asset Quality & AUM Growth: An asset book that is rigorously managed, demonstrating consistent growth in AUM and strategic risk management practices.

Merger Synergies: e strategic merger between Shriram Transport Finance and Shriram City Union Finance enhances cross-selling potential, boosts operational efciency, and generates substantial cost savings.

Technology-Driven Lending: Leveraging advanced technological capabilities, including data analytics, AI, and digital lending platforms, to optimise customer acquisition and credit risk assessment.

Weaknesses

Dependence on Commercial Vehicle Financing: A significant portion of the Companys loan book is heavily reliant on the cyclical demand for commercial vehicles, rendering it susceptible to economic contractions and downturns.

High Cost of Borrowing: As an NBFC, Shriram Finance faces comparatively higher borrowing costs than traditional banking institutions, which adversely afects its profit margins.

Limited Global Presence: In contrast to some of its competitors, Shriram Finances operations are largely confned to the domestic market, constraining its prospects for international expansion.

Opportunities

Financial Inclusion Growth: Broadening access to credit in underpenetrated rural and semi-urban regions holds significant potential for driving business growth and fostering economic uplifment.

Rising Demand for MSME Financing: e rapid expansion of Indias MSME sector presents significant opportunities for targeted financial lending and industry-specifc solutions. Digital Transformation: Enhanced fntech collaborations, AI-driven lending models, and mobile-based customer engagement platforms are poised to boost operational efciency and broaden customer outreach.

Strategic Divestments: e recent divestment of Shriram Housing Finance to Warburg Pincus facilitates the unlocking of capital to fuel core business expansion initiatives.

Expanding Product Portfolio: Introducing innovative financial products like unsecured loans, comprehensive insurance packages, and dynamic working capital solutions will substantially enrich revenue streams and enhance market presence.

reats

Regulatory Changes: Any potential tightening of NBFC regulations by the Regulator could significantly impact operational dynamics and increase compliance-related expenditures.

Interest Rate Volatility: A rise in interest rates may result in increased borrowing costs, thereby adversely afecting lending proftability and the overall cost structure.

Competition from Banks & Fintechs: Growing competition from traditional banking institutions, digital lenders, and fntech players could potentially undermine market share and pressure margins.

Macroeconomic Slowdowns: A broad economic slowdown, especially in sectors like transportation and MSMEs, could lead to higher NPAs.

Credit Risk & NPA Management: Efectively managing credit risk and addressing the challenges of non-performing assets remain a key factor for sustainability and stability in a turbulent economic climate.

FINANCIAL PERFORMANCE
		(Rs. in crores unless otherwise stated)
Particulars	FY 2024f25#	FY 2023f24	% Change
Total Income (including exceptional items)	43,783.52	34,997.61	25.10%
Net Interest Income	22,835.09	19,686.85	15.99%
Assets Under Management	2,63,190.27	2,24,861.98	17.05%
Securitisation/Direct Assignment done during the year	29,362.74	26,083.70	12.57%
Net Worth	56,708.53	48,803.22	16.20%
		(Rs. in crores unless otherwise stated)
Particulars	FY 2024f25#	FY 2023f24	% Change
Profit Afer Tax	9,761.00	7,190.48	35.75%
Earnings Per Share (Rs.)	51.92	38.33	35.46%
Capital Adequacy Ratio (%)	20.66%	20.30%	1.77%
Return on Total Assets (%)	3.51%	3.13%	12.14%
Debt Equity Ratio (times)	4.16	3.83	8.62%
Net Interest Margin (%)	8.55%	8.84%	(3.28%)
Interest Coverage Ratio (times)	2.25	2.34	(3.85%)
Net Profit Margin (%)	22.29%	20.55%	8.47%
Return on Net Worth (%)	18.58%	15.64%	18.80%
Gross Stage 3 (%)	4.55%	5.45%	(16.51%)
Net Stage 3 (%)	2.64%	2.70%	(2.22%)
Return on Equity (%)	18.58%	15.64%	18.80%

# includes exceptional items

As of March 31, 2025, Gross stage 3 assets improved to 4.55%, down from 5.45% a year earlier. Net stage 3 assets (afer provisions) also declined slightly to 2.64% from 2.70% as of March 31, 2024, refecting enhanced asset quality. ere were no material changes in key financial ratios during FY 2024–25 compared to the previous year, except for Total income (including exceptional items), Profit afer tax, and Earnings per Share. ese fgures were significantly impacted by an exceptional gain of Rs. 1,656.77 crores (Rs. 1,489.39 crores net of tax) from the disinvestment of SHFL. Return on Net worth improved to 18.58% as of March 31, 2025, compared to 15.64% in the previous year, driven by higher AUM growth, better asset quality and disinvestment of SHFL which together contributed to stronger proftability.

HUMAN RESOURCES

At Shriram Finance, the Companys success is fundamentally driven by its human capital. Understanding that the motivated and skilled workforce is essential for long-term growth, the Company places a strong emphasis on creating a supportive environment that fosters both safety and productivity. e HR team plays a key role in nurturing a workplace founded on the principles of integrity, transparency, and continuous learning. rough its focus on equality and strict enforcement of zero tolerance towards harassment, Shriram Finance ensures that employees operate in an environment of respect, security, and empowerment. e Company is not just an employer but a provider of long-term career growth, fostering trust and confdence across its workforce. e Companys HR policies are designed to ensure that employees acquire the necessary skills to succeed in a rapidly changing business environment. A strong, performance-orientated culture reinforces individual achievements, enhancing both employee capabilities and the Companys market position.

As Shriram Finance strives to become an organisation poised for the future, its focus remains frmly on the attraction, development, and retention of high-calibre talent.

Equal opportunity, employee well-being, and fostering a collaborative work environment remain central to the Companys human resources philosophy. e HR processes, designed around a framework of distinct competencies and intrinsic values, aim to cultivate a work culture that is inclusive and enriching. By March 31, 2025, the Company had employed 79,872 individuals, refecting a net increase of 5,227 employees throughout FY 2024-25, underscoring its expanding operations and resolute commitment to workforce expansion.

RISK MANAGEMENT

At Shriram Finance, risk management is an imperative strategic priority, safeguarding the interests of customers, employees, shareholders, and organization, all while fostering sustainable growth. e Company has crafed a robust risk management framework, harmonised with the best global practices and strengthened by a well-defned structured control mechanism.

e Risk Management Committee plays a key role in monitoring and addressing various risk categories, including credit, market, legal and regulatory, operational, liquidity, interest rate, cybersecurity, information technology, strategic, and economic risks. To counter these multifaceted and evolving threats, Shriram Finance employs a proactive approach, conducting in-depth risk evaluations and executing preventive measures.

A deeply ingrained culture of risk consciousness permeates the organisation, continuously reinforced through a framework of well-defned policies, operational guidelines, and stringent control procedures. e Board and its Committees ensure rigorous oversight, reviewing and approving risk-related policies to guarantee the independent identifcation, assessment, and management of risks across all operational domains.

Guided by principles of ethical governance and sustainability, Shriram Finances risk management philosophy is frmly embedded in its business model. rough continuous enhancement of risk controls and governance structures, the Company is positioned to thrive amid challenges, ensuring long-term financial stability and resilience.

Risk Management Framework

• Risk Identifcation: Conducting in-depth analyses to identify the root cause of potential risks and assess their possible ramifcations, thereby facilitating the development of precise and robust mitigation strategies.

• Risk Assessment: Undertaking a thorough evaluation of risks across various contingencies, ensuring a comprehensive understanding of their scope and potential consequences.

• Risk Response: Deploying tailored strategies to either mitigate, accept, transfer, or entirely eliminate risks based on their assessed severity and probability of occurrence.

• Ongoing Monitoring: Continuously tracking the risk landscape to identify emerging threats and ensure the prompt application of corrective measures.

• Process Evaluation & Improvement: Engaging in continuous review and refnement of risk management methodologies to increase their efectiveness and responsiveness to dynamic conditions.

Key Risks and Mitigation
Risk Type and Defnition	Mitigation
Credit Risk	With an esteemed legacy spanning over four decades, Shriram Finance has developed
Shriram Finance is inherently	subject to a robust framework for managing credit risk, underpinned by meticulously crafed
credit risk, which arises when borrowers policies and rigorous procedures. e Company follows a stringent credit assessment
or counterparties fail to fulfl	their protocol across all operational sectors, systematically scrutinising borrowers fnancial
contractual obligations. is form of risk is health, liquidity profles, and credit bureau insights. Regular stress testing and
an intrinsic component of the Companys scenario analysis are integral to the Companys strategy, enabling early identifcation
lending operations.	of potential risks and the swif execution of corrective measures.
	In its investment strategy, Shriram Finance utilises credit ratings from esteemed
	agencies, ensuring that its decisions are informed, strategic, and continually
	monitored. Counterparty risks are rigorously examined, considering the fnancial
	health, industry dynamics, and potential risks specifc to each sector. To prevent risk
	concentration, the Company adopts a diversifed approach, spreading its investments
	across various asset classes, industries, geographic regions, and borrower profles,
	maintaining a well-balanced and resilient credit portfolio.
Market Risk	Shriram Finance efectively mitigates market risk through a well-structured set of
Market risk refers to the potential	for policies and procedures, which undergo regular reviews to ensure strict adherence
fnancial loss arising from adverse to industry norms and regulatory frameworks. e Asset Liability Management
movements in market conditions.	ese Committee (ALCO) diligently tracks market trends, policy modifcations, and
fuctuations include variables like interest regulatory shifs within the NBFC sector, empowering the Company to proactively
rates, credit spreads, foreign	exchange refne its strategic response. By maintaining a forward-thinking stance, Shriram
rates, commodity prices, and other critical Finance consistently monitors market risks and strengthens its loan portfolio with
factors, each of which can infuence both a comprehensive Market Risk Management System. Furthermore, the Company
proftability and capital.	conducts rigorous stress testing across multiple asset categories to assess the potential
	impacts of market fuctuations and ensure robust preparedness for unexpected
	disturbances.
Operational Risk	e operational risk management framework at Shriram Finance is meticulously
Operational risk pertains to the chance crafed to ofer a methodical approach to identifying, assessing, managing, and
of financial losses due to	faws or mitigating risks across various departments. Key elements of the framework include
failures in internal operations,	human exemplary corporate governance, a commitment to ethical standards, and a company-
resources, technological infrastructure, or wide risk management strategy. e Company further empowers its workforce by
organisational confgurations. It	can also ofering specialised skill enhancement programmes and training sessions.
arise from defciencies in both regulatory Clearly defned operational procedures govern transactions, portfolio assessments,
and internal compliance	frameworks, and regulatory compliance, providing solid oversight at every level. Frequent risk-
as well as from unpredictable	external centric audits mitigate enterprise risks, while the periodic stress testing of the Disaster
factors.	Recovery (DR) and Business Continuity Plans (BCP) evaluates the Companys
	preparedness against unforeseen disruptions. Moreover, comprehensive contingency
	protocols are in place to protect data security and ensure quick recovery from force
	majeure events.
Risk Type and Defnition	Mitigation
MSME Finance Risk	To profciently navigate and mitigate risks, Shriram Finance employs an array of
MSME fnancing risk pertains to	the strategic measures. e Company conducts comprehensive credit assessments,
potential for financial detriment or adverse	carefully identifying financial statements, cash fow trends, collateral valuations, and
consequences arising from the provision	credit histories. Furthermore, risk exposure is minimised through prudent portfolio
of financial services to	Micro, Small, diversifcation, strategically allocating loans across diverse sectors, geographical
and Medium Enterprises. is risk is	regions, and borrower categories.
infuenced by a myriad of factors, including
the creditworthiness of borrowers, market
instabilities, operational inefciencies,
regulatory adherence,	interest rate
volatility, technological	advancements,
and unforeseen external disturbances.
Interest Rate Risk	Shriram Finance has instituted a comprehensive set of policies and procedures
e potential for financial loss stemming	to ensure strict compliance with regulatory mandates governing asset and liability
from adverse shifs in	interest rates, management. e Company conducts an in-depth evaluation of rate-sensitive assets
impacting both lending and treasury	and liabilities, meticulously assessing the alignment between the maturity profles of
operations. is risk is	a fundamental its loan book and fuctuations in interest rates.
determinant of a companys net interest	In determining interest spreads, assets and liabilities are categorised into distinct
income and overall financial proftability,	timeframes based on their contractual maturities or anticipated re-pricing schedules.
significantly infuencing its fscal stability.	e discrepancy between the maturities of assets and liabilities, or their re-pricing
	potential at any given juncture, signifes the Companys exposure to potential margin
	variations on newly originated or re-priced assets and liabilities.
Liquidity Risk	Shriram Finance adeptly addresses liquidity risk through a meticulously structured
is risk arises when Shriram Finance	framework of policies and procedures, rigorously endorsed by the Asset Liability
faces obstacles in meeting its fnancial	Management Committee (ALCO). e Company has instituted robust controls and
commitments within	the stipulated mechanisms aligned with its Asset Liability Management (ALM) policies, ensuring
deadlines or as per the agreed schedules.	the efective management of liquidity.
	To evaluate liquidity risk at distinct maturity intervals, the Company employs
	analytical techniques such as maturity ladder analysis and cumulative surplus/defcit
	calculations. In addition, a comprehensive contingency plan is in place to manage
	liquidity strains during exigent circumstances.
	By vigilantly monitoring capital adequacy and asset exposures, Shriram Finance
	systematically assesses its potential funding requirements. e Company maintains
	a diversifed and resilient funding base, drawing capital from an array of sources
	including banks, financial institutions, capital markets, and public fxed deposits,
	thereby ensuring ample financial fexibility. Furthermore, periodic training sessions
	focused on cash fow and asset-liability management are conducted to fortify long-
	term financial robustness.
Cash Management Risk	With a frm commitment to technological progress, the Company continues to
e risk associated with cash management	enhance its customer onboarding process through its digital platform. Shriram
in loan repayment collections refects the	Finance has created a reliable cash management framework, engaging customers
possible obstacles and unpredictabilities	through easy-to-use digital payment systems via the My Shriram Mobile Application.
faced by a financial entity in securing	To further improve convenience, multiple payment options, including BBPS (Wallets),
prompt and full payments from	its have been incorporated to streamline loan repayments.
borrowers.	Furthermore, the Company obtains NACH mandates from chosen customers,
	ensuring that stringent checks and controls are consistently applied across all
	branches. Regional branch collections are closely monitored with daily reconciliation
	to maintain operational accuracy and efectiveness.
Risk Type and Defnition	Mitigation
Climate Risk	In its proactive approach to managing climate-related risks, Shriram Finance
e rise of climate change as a pervasive	has implemented a robust ESG framework that underscores its commitment to
global	challenge is reshaping numerous environmental sustainability. e Companys dedication to sustainability is manifest
aspects of human life. e financial sector,	in rigorous governance and efective oversight at the highest strategic levels. Significant
notably non-banking financial companies	achievements include significant reductions in energy usage, lower emissions, and the
(NBFCs), is not immune to its expanding	successful implementation of tree-planting initiatives.
consequences. With the growing visibility	Looking forward, Shriram Finance intends to leverage technological innovations and
and disruption caused by climate-related	refne operational strategies to achieve further reductions in energy consumption.
events,	there is a heightened resolve to With a focus on mitigating climate-related risks, the Company remains dedicated to
embed	sustainability into the very fabric contributing to a sustainable and ecologically responsible future.
of business operations.
Information Technology Risk	Shriram Finance has made substantial investments in state-of-the-art technological
is risk arises from systemic failures in IT	infrastructure and advanced platforms to enhance its business information systems.
infrastructure or breaches in data security,	In order to mitigate risks associated with information technology, the Company
which can trigger operational disruptions	has implemented a robust IT risk management framework, incorporating rigorous
and incur severe financial repercussions.	checks, controls, and preventative safeguards.
	Regular security drills and comprehensive employee training programmes are
	conducted to reinforce the integrity of the IT infrastructure and shield network
	systems from both internal and external threats. To ensure heightened resilience,
	Shriram Finance maintains a 24/7 Security Operations Centre (SoC) that rigorously
	conducts disaster recovery simulations and exhaustive security testing before the
	deployment of any applications, thereby strengthening its Recovery Point Objective
	(RPO) and Recovery Time Objective (RTO).
	Furthermore, the Company undertakes frequent vulnerability assessments and
	penetration testing, tapping into both internal expertise and external consultancy. In
	the event of operational disruptions, Shriram Finance is equipped with meticulously
	crafed contingency plans to guarantee the uninterrupted continuation of critical
	business functions, safeguarding customer interests at all times.
Cybersecurity Risk	Shriram Finance has established an advanced and comprehensive cybersecurity
With	the mounting reliance on framework, meticulously designed to proactively address and neutralise a broad
digital	ecosystems and internet-based spectrum of cyber threats. A round-the-clock Security Operations Centre (SoC)
functionalities, the	peril of cyberattacks stands at the forefront of safeguarding the Companys most critical assets, supported
and hacking has substantially increased.	by substantial investments in state-of-the-art security technologies. To enhance its
	cyber resilience, the Company relies on a team of expert professionals specializing in
	the detection and mitigation of sophisticated threats.
	To ensure the utmost security of its operations, Shriram Finance has implemented a
	structured information security framework, aligning its policies and protocols with
	global industry standards. e Company continually invests in employee training and
	awareness initiatives, equipping its workforce with the necessary tools and knowledge
	to combat cyber threats such as phishing, ransomware, malware, and spoofng.
	In recognition of its commitment to information security, Shriram Finance has
	achieved ISO 27001 certifcation for its Information Security Management System,
	extending its robust security practices to encompass all IT functions. An advanced
	Email reat Prevention (ETP) system serves as a critical line of defence, preventing
	malicious emails from reaching employees and ensuring seamless operations.
	To further strengthen its cybersecurity posture, Shriram Finance conducts frequent
	penetration testing, proactively seeking and addressing potential vulnerabilities in
	its IT infrastructure and network. e implementation of stringent fraud prevention
	mechanisms also ensures the secure validation of risk-based transactions, reinforcing
	the Companys commitment to comprehensive cybersecurity resilience.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Shriram Finance has established a rigorous organisational framework, supported by well-documented policies and an unequivocal authority matrix, aimed at enhancing operational efciency, ensuring compliance with both internal policies and regulatory standards, and safeguarding its assets. e Company appreciates that an efective internal control system is indispensable for the seamless execution of day-to-day operations.

To this end, Shriram Finance has implemented an expansive internal control system that blends business processes, financial reporting, fraud prevention, and regulatory compliance with the highest industry standards. Comprehensive controls are woven throughout the organisation to maintain impeccable governance standards and to ensure uniformity and efciency across all operational functions. e Company ensures that the internal control structure is consistently applied across its operations, protecting assets and assuring the fawless execution of all transactions, in strict accordance with established protocols. e internal control framework is strengthened further by thorough internal audits, regular management reviews, and a set of standardised policies and procedures designed to uphold the accuracy and reliability of both financial and operational records. Management regularly reviews the systems efectiveness, aligning it with the Internal Control

- Integrated Framework (2013), as recommended by the Committee of Sponsoring Organisations of the Treadway Commission (COSO).

Shriram Finances Audit Committee systematically reviews internal audit reports, ensuring robust financial controls over reporting processes. Internal audits assess the adequacy of the control systems and compliance with organisational policies. Audit areas are determined based on extensive risk assessments, impact analysis, and a comprehensive evaluation of the internal control environment. Regular monitoring and testing ensure that internal controls remain resilient and uphold superior governance standards. Additionally, Shriram Finance has instituted a risk-based internal audit policy, emphasising its oversight functions. ese audits focus on identifying key operational activities, evaluating control efectiveness, and recommending process improvements and risk mitigation strategies. is proactive approach ensures that the Companys internal controls remain robust, adaptable, and aligned with changing business conditions and regulatory frameworks.

FUTURE STRATEGY

e Board has outlined a strategic roadmap for the next 3 to 5 years, centered on driving sustainable growth and achieving operational excellence. e key initiatives include:

• Periodic Review of Business Strategies: Conducting regular evaluations to ensure alignment with market dynamics while maintaining efcient liquidity management.

• Optimising Operations and Expanding the Product Portfolio: Streamlining workfows and broadening the range of products across all branches to better serve customer needs.

• Leveraging the SuperApp: Harnessing the power of Shrirams unifed digital platform to integrate the entire ecosystem, delivering seamless experiences to customers.

• Enhancing Loan Disbursement and Collections:

Utilizing advanced data analytics to strengthen loan processing, improve collection efciencies, and ensure timely decision-making.

• Strengthening Market Leadership: Driving continuous innovation and pursuing strategic advancements to reinforce Shriram Finances position as an industry leader.

• Improving Loan Portfolio Quality: Implementing comprehensive risk assessment and mitigation strategies to enhance asset quality and ensure long-term stability.

• Deepening Customer Relationships: Fostering customer loyalty and satisfaction through personalized engagement and relationship-building initiatives.

• Expanding Customer Acquisition: Ofering seamless digital payment solutions to attract and onboard a wider customer base.

• Adopting Artifcial Intelligence and Machine Learning: Increasing the integration of AI and ML technologies across operations to deliver superior customer service and operational efciency.

• Launching Tailored Financial Solutions: Introducing customized products that address evolving customer needs, expanding the product suite, and enhancing market competitiveness.

• Maximizing Customer Lifetime Value: Deepening customer engagement through efective cross-selling and upselling strategies, providing relevant products and services.

• Expanding the Agent Network: Growing the network of agents to enhance the distribution and penetration of retail liability products, supporting the Companys focus on mobilizing low-cost funds.

• Promoting Diversity and Inclusion: Fostering a more equitable workplace by increasing the representation of women across various roles and leadership positions, thereby creating a dynamic and inclusive environment.

CAUTIONARY STATEMENT

StatementsmadeinthisManagementDiscussionandAnalysis Report may contain certain ‘forward-looking statements based on various assumptions about the Companys present and future business strategies and the environment in which it operates. Actual results may difer substantially or materially from those expressed or implied due to risk and uncertainties. ese risks and uncertainties include the national and global efects of economic conditions, political conditions, volatility in interest rates, changes in regulations and policies impacting Companys businesses and other related factors. e information contained herein is as referred to. e Company does not undertake any obligation to update these statements. e Company has obtained the data and information referred here from sources believed to be reliable or from its internal estimates, the accuracy or completeness of which cannot be guaranteed.