SMC Credits Ltd Management Discussions

ECONOMIC REVIEW – GLOBAL ECONOMY

Financial Year 2025-26 commenced against a backdrop of moderating but still elevated geopolitical tensions, gradually easing inflationary pressures and improving supply chain conditions. The prolonged Russia-Ukraine conflict continued to weigh on global economic sentiment, while renewed hostilities in the Middle East in early 2026 added fresh uncertainty. Trade tensions, particularly tariff measures introduced by the United States administration, imparted significant policy uncertainty on global growth and investment. According to the International Monetary Fund (IMF) World Economic Outlook (April 2026), global growth is projected at 3.1 percent in 2026 and 3.2 percent in 2027. Global headline inflation is expected to tick up modestly in 2026 before resuming its decline in 2027. Pressures are concentrated in emerging market and developing economies, especially commodity importers with pre-existing vulnerabilities.

World Economic Outlook Growth Projections

Particulars	2025	2026 (Projected)	2027 (Projected)
	(Actual/Est.)
World	3.3%	3.1%	3.2%
Advanced Economies	1.9%	1.5%	1.6%
India	6.5%	6.5%	6.2%
Emerging Market and Developing Economies	4.2%	3.9%	4.1%

Source: IMF World Economic Outlook, April 2026.

FINANCIAL SERVICES – NBFC SECTOR

Non-Banking Financial Companies (NBFCs) continue to play an increasingly important role in meeting the credit needs of the Indian economy by extending last-mile credit to hitherto unbanked areas and providing niche financing across sectors ranging from housing and infrastructure to agriculture and micro-loans. NBFCs bring more borrowers into the formal financial institutional network, enhancing the reach of the credit channel of monetary transmission. The NBFC sector has demonstrated robust resilience and growth momentum in FY 2025-26. The cumulative value of NBFC loans was close to 52 trillion as of December 2024 and is expected to breach 60 trillion by FY26. Credit growth within the sector is projected to sustain an annual pace of 15–17% through FY28, driven by continued demand in retail lending segments such as housing, vehicle finance, and MSME credit. Large and mid-tier NBFCs backed by diversified parent organisations, efficient risk frameworks, and enhanced use of analytics and digital onboarding tools have attracted significant investor interest, with private credit inflows into Indian financial services touching a record US$9 billion in the first half of 2025. The sector has continued to leverage digitalisation to offer alternative financing options, especially to MSMEs and retail borrowers who face challenges in obtaining loans from traditional banks. Demand for credit has remained strong in India, particularly among micro, small and medium enterprises (MSMEs) and retail segments. The Government of Indias reform initiatives — including the Pradhan Mantri Mudra Yojana (PMMY), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), ONDC, and the National Infrastructure Pipeline under the Gati Shakti programme — continue to underpin credit demand.

INDIAN ECONOMIC OVERVIEW

The Indian economy has exhibited sustained strong performance in FY 2025-26. According to the Provisional Estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) in June 2026, real GDP grew at 7.7% in FY 2025-26, accelerating from 7.1% in FY 2024-25. This was above the First Advance Estimate of 7.4% and in line with the Second Advance Estimate of 7.6%, reflecting a broad-based recovery driven by robust private consumption, strong public capital expenditure and buoyant services sector activity. Nominal GDP grew by 8.9% during FY 2025-26. Quarterly performance was notably consistent: real GDP grew 7.8% in Q1, 8.2% in Q2 (as per RBI Financial Stability Report, December 2025), 7.8% in Q3 (October–December 2025), and 7.8% in Q4 (January–March 2026). The manufacturing sector recorded double-digit growth for the second time in three financial years after rebasing, establishing itself as a key pillar of Indias economic resilience. The Trade, Repair, Hotels, Transport, Communication and related Services sector attained a growth rate of 10.1% at constant prices in FY 2025-26. Domestically, real Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) both exhibited more than 7% growth in FY 2025-26. Indias CPI inflation for FY 2025-26 averaged approximately 2.1%, well below the RBIs 4% target, creating substantial headroom for monetary policy easing. The RBI undertook multiple rate cuts during FY 2025-26, with the repo rate at 6.25% as of February 2025 and further reductions expected through FY26.

OUTLOOK

Indias domestic economic activity remains strong and is expected to continue on a robust trajectory. The RBI has projected real GDP growth for FY 2026-27 at 6.9%, with Q1 at 6.8%, Q2 at 6.7%, Q3 at 7.0%, and Q4 at 7.2%. The Economic Survey 2025-26 projected FY 2026-27 real GDP growth in the range of 6.8% to 7.2%, reflecting continued momentum in public infrastructure spending, improving private investment conditions, and sustained services sector strength. India continues to be the worlds fastest-growing major economy. The IMF, in its April 2026 World Economic Outlook, projects Indias calendar year 2026 GDP growth at 6.5%. Indias demographic advantage, expanding digital economy, manufacturing growth driven by the China+1 supply chain diversification trend, and infrastructure development initiatives provide a strong structural foundation. Foreign exchange reserves stood at USD 697.1 billion as of April 2026, and net FDI has shown improvement, affirming Indias position as a priority destination for long-term global investment. The measures announced in the Union Budget 2026-27, including continued capex thrust and GST rationalisation, augur well for improving domestic consumption. Well-coordinated fiscal and monetary policy working in tandem is expected to generate improved outcomes in terms of a better growth-inflation balance. However, the renewed conflict in the Middle East, elevated energy and commodity prices, and global trade policy uncertainty remain key risks to monitor.

INDUSTRY STRUCTURE AND DEVELOPMENTS

INDUSTRY INSIGHTS

Non-Banking Financial Companies (NBFCs) continue to enhance the mainstream banking system in the financial intermediation process and financial inclusion. NBFCs play a significant role in promoting inclusive growth by providing financial services to less-banked customers as well as the unorganised sector, including MSMEs, through efficiency and diversity. The NBFC sector has recorded higher credit growth than Scheduled Commercial Banks (SCBs) over the past several years, and this outperformance continued in FY 2025-26. The RBIs Scale-Based Regulation (SBR) framework, effective since October 2022, has brought regulatory rigour by categorising NBFCs into four layers based on size, complexity, and systemic importance. Corporate governance norms now mandate appointment of independent directors, risk committees, and audit oversight functions comparable to banking standards, reflecting the RBIs recognition that NBFCs have become systemically important institutions.

DIVERSIFIED OFFERINGS

NBFCs offer a wide range of financial products and services including personal loans, commercial vehicle finance, housing loans, infrastructure finance, gold loans, microfinance, money transfer, insurance, education funding, and many more customised finance solutions. NBFC MSME AUM is projected to cross 5.3 lakh crore by FY26, supported by a 32% CAGR from FY21 to FY24, significantly outpacing bank growth rates. NBFCs hold a 45% market share in micro-LAP (loans below 10 lakh ticket size), demonstrating their dominant position in underserved segments.

ROBUST OPERATIONAL MODEL AND REGULATORY COMPLIANCE

With NBFCs focusing on lending to unorganised and underserved segments, a robust risk management strategy remains critical for business sustainability. The RBIs existing framework includes minimum Net Owned Funds requirements, prudential risk weights, and enhanced reporting obligations. The April 2025 rollback of increased risk weights on NBFC lending by the RBI has provided relief to the sector, supporting credit flow and improving funding economics. NBFCs continue to manage credit risk, liquidity risk, operational risk, and interest rate risk through a combination of internal controls, digital monitoring tools, and regulatory compliance.

SEEKING LONG-TERM GROWTH OPPORTUNITIES

NBFCs have contributed towards the development of the countrys infrastructure and continue to facilitate credit expansion across microfinance loans, personal loans, and auto finance loans. The digital transformation journey of NBFCs in India underscores the sectors adaptability and resilience. The sector is poised for continued growth driven by government commitment to financial inclusion, RBIs monetary easing cycle lowering borrowing costs, expanded access to External Commercial Borrowings, and technology-driven reduction in cost-to-serve models. Industry observers expect NBFC sector profits to nearly double by FY30.

CAPITAL MANAGEMENT

While adhering to the guidelines laid down by the RBI from time to time, the Company works towards maximising the returns on capital employed through an efficient capital management strategy. The Companys capital adequacy has remained well above regulatory requirements, supported by strong profitability and prudent balance sheet management.

SWOT ANALYSIS

Strengths

• Simplified and prompt loan request appraisals and disbursements.

• Innovative resource mobilisation techniques and prudent fund management practices.

• Strong dividend income from diversified investments in shares and securities.

• Robust internal controls and compliance framework aligned with RBIs Scale-Based Regulation.

Weakness

• Regulatory restrictions – continuously evolving government regulations may impact operations.

• Uncertain economic and geopolitical environment, particularly the renewed Middle East conflict.

• Funding concentration risk and reliance on market borrowings.

Opportunities

• Use of digital solutions for business operations, customer onboarding and collections.

• Expanding MSME and retail credit market supported by government financial inclusion programmes.

• RBI monetary easing cycle improving funding cost economics for NBFCs.

• Growing demand for credit in Tier 2 and Tier 3 cities and rural markets.

Threats

• High cost of funds for smaller NBFCs amid tight liquidity conditions.

• Rising Non-Performing Assets (NPAs), particularly in unsecured retail lending segments.

• Restrictions on deposit-taking NBFCs.

• Competition from other NBFCs, banks, and new-age fintech lenders.

• Global geopolitical risks, particularly rising energy prices due to Middle East conflict.

RISKS AND CONCERNS

SMC Credits Limited maintains constant vigilance over both external environments and internal risks, ensuring it remains well-prepared with effective risk mitigation measures to address potential threats. This proactive approach allows the Company to capitalise on opportunities arising from various events and effectively navigate challenges posed by potential threats. Some of the identified risks and concerns include:

• A slowdown in the global and Indian economy, potentially triggered by the ongoing Middle East conflict, elevated energy prices, and escalating geopolitical tensions.

• Renewed inflationary pressures in the Indian economy due to higher global commodity and energy prices, which may constrain monetary policy easing headroom.

• A potential slowdown in the real estate sector, which could impact collections and loan book growth.

• The possibility of facing challenges in raising funds at competitive borrowing costs, particularly for smaller and mid-sized NBFCs, which may impact overall profitability and growth.

• Execution risks associated with the Companys business verticals and newly launched or emerging unsecured loan products.

• Regulatory compliance requirements under RBIs evolving Scale-Based Regulation framework. By closely monitoring these factors, SMC Credits Limited endeavours to proactively address and mitigate potential risks while seizing opportunities for sustainable growth and maintaining a robust financial position.

FINANCIAL PERFORMANCE

The Companys major source of earnings is dividend income, which comes from investments in shares and securities. During the year under review, the Company achieved a significantly improved financial performance in FY 2025-26. The highlights of the financial performance of your Company for the year ended 31st March, 2026, along with the previous years figures, are awaited upon finalisation of accounts. The Companys detailed standalone financial statements will reflect performance for FY 2025-26.

Key Financial Performance Highlights (Standalone) – FY 2025-26 vs FY 2024-25

Particulars	31st March, 2026	31st March, 2025
	(Amount in Lakhs)	(Amount in Lakhs)
Profit before depreciation and taxation	3994.09	1,562.38
Less: Depreciation	4.56	4.18
Add: Exceptional Items	-	-
Current Tax	735.81	306.58

Analytical Ratios: The Company is a Non-Core Investment Company (CIC), not accepting deposits from the public and is a non-systemically important NBFC. The Company is not exposed to any regulatory imposed capital requirements. Thus, the following analytical ratios are not applicable to the Company:

• Capital to risk-weighted assets ratio (CRAR)

• Tier I CRAR

• Tier II CRAR

• Liquidity Coverage Ratio

INTERNAL CONTROL SYSTEMS

We have instituted the three lines of defence model, viz. (i) management and internal control measures, (ii) financial controls, risk management practices, security measures and compliance oversight, and (iii) a robust internal audit function providing the third level of defence.

Summarised Standalone Financial Performance (Amount in Crores)

Particulars	FY 2025-26	FY 2024-25	Change (%)
Revenue from Operations	25.43	15.31	66.10%
			Increase
Other Income	17.01	3.70	359.73%
			Increase
Total Income	42.44	19.01	123.25%
			Increase
Employee Benefit Expense	0.46	0.40	15.00%
			Increase
Finance Cost	0.51	1.23	58.54%
			Decrease
Depreciation and Amortization	0.05	0.04	25.00%
			Increase
Other Expense	1.53	1.75	12.57%
			Decrease
Total Expenses	2.54	3.42	25.73%
			Decrease
Profit Before Tax	39.90	15.59	155.93%
			Increase
Tax Expense	7.35	3.07	139.41%
			Increase
Profit After Tax	32.55	12.52	159.98%
			Increase
Earnings Per Share ( )	12.99	5.00	159.80%
			Increase

The Company has proper and adequate systems of internal controls to ensure that all its assets are safeguarded and protected against loss from unauthorised use or disposition, and that transactions are recorded and reported. The Company ensures adherence to all internal control policies and procedures as well as compliance with all regulatory guidelines. The Company has an independent internal management assurance function which is commensurate with its size and scale. 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 the prescribed regulatory and legal framework.

HUMAN RESOURCES POLICIES

The Company has a friendly HR policy and takes care of and redresses all concerns of its employees. For the Company, the stakeholders are the biggest assets, and for all-round development of employees at all levels, various initiatives are undertaken at regular intervals.

INDUSTRIAL RELATIONS

The Company has maintained healthy industrial relations which were cordial during the period under review.

ACKNOWLEDGEMENT

The Directors express their sincere thanks and gratitude for the guidance, support, and co-operation extended by Banks, government authorities/departments, and all other organisations.

CAUTIONARY STATEMENTS

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. Important developments that could affect the Companys operations include a downtrend in the financial services industry, global or domestic or both, significant changes in the political and economic environment in India or key markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other factors. Actual results might differ substantially or materially from those expressed or implied. This report should be read in conjunction with the financial statements included herein and the notes thereto.

	For and on behalf of the Board
	Rajesh Goenka
New Delhi	Chairman & CFO
August 14, 2026	DIN: 00298227