SIL Investments Ltd Management Discussions

The management of the Company is pleased to present the Management Discussion and Analysis Report (to the extent applicable to the Company) covering overall performance and outlook of its activities.

ECONOMIC SCENARIO AND OUTLOOK Global Economy

During 2023, the global economy witnessed several challenges, yet demonstrated resilience with a GDP growth of 3.1 percent over the past year. The growth was supported by several factors including improvements in labour market conditions, resilient trade activities, stable commodity markets, and declining inflation rates. Both, advanced and developing economies outperformed expectations, contributing significantly to the overall economic performance. As per the International Monetary Fund - World Economic Outlook update, the global economy is projected to sustain a growth rate of 3.2 percent throughout 2024 and 2025, mirroring the pace observed in 2023. The report indicates a slight uptick in advanced economies, with growth expected to climb from 1.6 percent in 2023 to 1.7 percent in 2024 and 1 .8 percent in 2025. However, this is counterbalanced by a modest deceleration in emerging market and developing economies, transitioning from 4.3 percent growth in 2023 to 4.2 percent in both 2024 and 2025.

As per Reserve Bank of India (RBI), global growth has remained resilient, supported by both public and private spending alongside robust labour market conditions. Looking ahead, the likelihood of a sudden economic downturn has diminished, with risks to the outlook now balanced. However, continued geopolitical tensions, high levels of public debt amidst tight financial conditions, a sluggish recovery in China, geo-economics fragmentation and extreme weather events present downside risks to the outlook. On the upside, faster disinflation and a slower withdrawal of fiscal stimulus provide opportunities. The evolving perceptions of monetary policy trajectories and ongoing geopolitical conflicts are contributing to volatility in global financial markets. Despite bright growth prospects in Emerging Market Economies (EMEs), weak global demand, obstacles to global trade, fluctuating capital flows, high debt levels, extreme weather events and tight

financial conditions pose risks to their outlook. While inflation has moderated across various countries due to restrictive policies and easing of supply shocks, it still remains above targets, especially in advanced economies, and the final stages of disinflation are likely to be gradual.

Indian Economy

The Indian economy demonstrated resilience, recording a robust growth of 7.6 percent in FY24, surpassing the previous fiscal year. Strong domestic demand, favourable government policies and growth trends across critical sectors drove this increase. Despite the global economic slowdown, Indias growth rate exceeds that of many comparable economies, indicating resilient domestic consumption and reduced reliance on global demand. The Indian economy has risen from being 10^th to 5^th largest globally, the per capita income has doubled and increased to Rs. 1.97 lakhs in 9 years. Domestic consumption and infrastructure spending contributed to growth, and government initiatives such as Gati Shakti will boost industrial competitiveness and future growth.

NBFC

As per RBI reports, NBFCs have solidified their foothold in the Indian financial sector by extending credit and financial products to previously unbanked and underserved areas. Substantial capital buffers, improving asset quality and robust earnings have increased the resilience of the NBFC sector: the Capital to Risk-Weighted Assets Ratio at 27.6 percent in September 2023 remains well above the regulatory minimum of 15 percent; the Gross Non-performing Assets ratio has declined from a high of 7.2 percent in December 2021 to 4.6 percent in September 2023; and Net Interest Margin and Return on Assets stood at 5.1 percent and 2.9 percent, respectively, in September 2023.

The Supervisory and Regulatory (SBR) framework for NBFCs was issued on 22^nd October, 2021 and became effective from 01 ^st October, 2022. The initial assessment suggests that the NBFC sector has become stronger and resilient post introduction of the SBR framework. As on 30^th September, 2023, NBFCs in the base, middle and upper layers constituted 6 percent, 71 percent and 23 percent of the total assets of NBFCs, respectively.

The Company

Your Company is a registered NBFC with RBI since 22^nd May, 2009. The mainstay of your Companys operations continued to be investments in various companies, under which steady dividend income flows into the Company coupled with sustained appreciation in capital. During the year under review, your Company has earned income in the form of dividends, interest, and profit on sale of investments.

Financial Performance

Your Companys standalone and consolidated financial performance for F.Y. 2024 vis-a-vis the previous year is given below:

(Rs. in lakhs)

Profits after tax on a consolidated basis over the last five years and movement of net worth are plotted on Charts A and B respectively:

Details of significant changes in key financial ratios

Notes:

• Above ratios are based on Standalone Financials of the Company.

• Interest Coverage Ratio increased due to substantial decrease in interest cost, on account of repayment of borrowings during the year.

• Decrease in Debt Equity Ratio is due to repayment of borrowings during the year.

• Positive changes in the Current Ratio are due to increase in fair valuation of Investments/ Currents Assets.

• Decrease in Operating Profit Margin and Net Profit Margin is due to increase in expense and current tax.

• Decrease in return to Net Worth ratio is due to increase in reserves resulting from other comprehensive income, specifically related to the fair valuation of Investments.

Asset Liability Management (ALM)

The Companys Asset-Li ability Committee (ALCO), set up in line with the guidelines issued by the RBI, monitors asset-liability mismatches to ensure that there is no imbalance or excessive concentration on either side of the Balance Sheet. The Company continues to closely monitor liquidity in the market and as part of its ALCO strategy, maintains a liquidity management desk to reduce its liquidity risk.

Fulfilment of RBIs Norms and Standards

Your Company fulfils the standards laid down by RBI relating to recognition and provisioning of non-performing assets, capital adequacy, statutory liquidity ratio, etc. The capital adequacy ratio of the Company is well above the RBI norm of 15%.

INVESTMENTS

The portfolio of the Company in quoted investments as on 31^st March, 2024 was Rs. 1,41,000 lakhs, at market value.

Risks and Concerns

Your Company is exposed to specific risks that are peculiar to its business and the environment in which it operates, which includes market risk, interest rate volatility, execution risk and economic cycle.

• The Company has significant quoted investments which are exposed to fluctuations in stock prices. These investments represent a substantial portion of the Companys core capital and are vulnerable to fluctuations in the stock markets. Any decline in these quoted investments may severely impact its financial position and results of operations.

• Liquidity Risk: Asset / Liability Management: The Company is exposed to liquidity risk principally as a result of lending to its customers for periods which may differ from those of its funding sources. Financial firms are now increasingly focused on asset-liability risk. Asset-liability risk is a leveraged form of risk. The capital of most financial institutions is small relative to the firms assets or liabilities, hence small percentage changes in assets or liabilities can translate into large percentage changes in capital.

The risk is that the value of assets might fall or that the value of liabilities might rise. The Company is alive to the dynamics of this risk and has in place a control structure for closely monitoring incipient signs of risk in this area and to take necessary corrective measures, if needed. The Companys treasury actively manages asset liability positions in accordance with the overall guidelines laid down by the management in the Asset Liability Management (ALM) framework.

• The Company can be adversely affected by volatility in interest rates in India, which could cause its margins to decline and profitability to shrink. It is therefore exposed to interest rate risk, principally as a result of lending to its customers at interest rates, in amounts, and for periods which may differ from those of its funding sources. Your Company is hedged to a large extent against this risk through the reset clause in its advances portfolio.

• While the Indian economy has shown sustained growth over the last several years, a slowdown could cause the business of the Company to suffer. The Company manages such risks by maintaining a conservative financial profile and following prudent business and risk management practices.

• The risk appetite is enunciated by the Board from time to time. The Company has in place specially mandated Committees such as ALCO, Risk Management Committee, besides Nomination and Remuneration Committee and Audit Committee.

Internal Control Systems

The Company has an independent internal control system which is commensurate with the size and scale of the Company. It evaluates the adequacy of all internal controls and processes and ensures strict adherence to clearly laid down processes and procedures as well as to prescribed regulatory and legal framework. Conforming to the requirements of regulatory authorities such as the RBI and SEBI and consistent with the requirements of the Listing Regulations of the Stock Exchanges, the Company has institutionalized an elaborate system of control processes designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, reliability of financial controls and compliance with applicable laws and regulations. The Internal Auditors are mandated to carry out periodical audit and report on areas of non-compliances / weaknesses. Corrective actions in case of reported deficiencies, if any, are taken actively to further strengthen the internal control systems. These reports are reviewed by the Audit Committee of the Board of Directors for follow-up action and instructions are issued for taking necessary measures.

Outlook

The Companys present business operations are preponderantly that of an investment company, future of which largely depends upon financial and capital markets. Your Company has investments in debt instruments (including through mutual funds), financially sound companies and immovable properties. The income from Dividends will continue to contribute to the income of the Company. The management is optimistic about the future outlook of the Company. The Company will expand its activities, consistent with its status as a NBFC.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied. Important factors that could make a difference to the Companys operations include changes in Government regulations and tax regime, economic developments within India and abroad, financial markets, etc.

The Company assumes no responsibility in respect of forward-looking statements that may be revised or modified in future on the basis of subsequent developments, information or events. The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014. The management of the Company has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner, the state of affairs and profit/loss for the year. The narrative on our financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the Annual Report.