Stellar Capital Services Ltd Management Discussions.

Your Company is a NBFC focused on providing bespoke financing solutions to its customers and has been in existence for more than two decades. At present, the Company falls within the category of "Non-Banking Finance Company - Non-Deposit taking Company". Your Company is registered with the RBI as a NBFC not accepting public deposits under section 45 IA of the RBI Act, 1934.

The Company focuses on being a partner credit institution and provides customised financial solutions to Indian Corporates and Enterprises for their growth and working capital requirements. Stellar has an in-house team of experts to evaluate, value and estimate marketability of all kinds of assets.

The Product portfolio of the Company primarily consists of Working Capital Loan, Project Finance, Loan Against Property, Project Finance – Real Estate and Structured Finance. The Companys product suite is as follows: Working Capital Loan

• Short-term financial support for hassle-free management of day-to-day operations.

• Easy option to cover recurring expenses like inventory management, accounts payable and payroll.

• Flexible options to cater to seasonal fluctuations in business.

Project Finance

• Capital funding to mid-range and emerging corporates, based on projected cash flows and sufficient collateral.

• Financial assistance for expansion, diversification, funding for capital expenditure and other growth-oriented strategies of businesses. • Well-defined processes backed by credit appraisal and secured by project assets. Loan Against Property

• Easy loans against property collateral for various corporate requirements, ranging from debt consolidation to take over of existing facilities.

• Equitable or registered mortgage over the financed property, with personal guarantee and corporate guarantee.

• Enhanced focus on collateral valuation and loan serviceability.

Project Finance – Real Estate

• Project-specific funding to facilitate the acquisition, construction and development of residential, commercial, retail, township and industrial real estate projects.

• Long-term loans for re-development projects and property development ventures.

Structured Finance

• Customized term loans, inter-corporate deposits, subscription to debt instruments and convertible preference shares.

• Tailormade structured financial services to support acquisitions, expansions, buyouts and diversifications.

• Promoter funding secured against property, pledge of marketable securities or fixed deposits, guarantee of corporate entity, owner or promoter, debt service reserve account, etc.

Our Strengths

We believe the following are our principal strengths:

Experienced, highly motivated and dedicated management team

We have an experienced, highly motivated and dedicated senior management team, with significant experience in the banking, financial services, consultancy and infrastructure sectors. Our new and dynamic senior management team has already implemented a number of changes in the Company for steady growth of the business. One of the changes was to diversify our lending focus to become sector agnostic and lend with a focus on good quality collateral asset.

Institutional philosophy of prudent risk management controls through streamlined procedures

We maintain healthy and high-quality loan asset portfolio in synchronization with our institutional philosophy of lending against security, which we call asset backed lending. We have instituted prudent and comprehensive risk management controls, policies, and procedures that are critical for the long-term sustainable development of our organization. Our Risk Management Committee which is a Board level committee oversees and monitors the overall credit risk management framework. Our credit risk governance framework comprises of primarily three-units,

(i) our business teams, that generates lead;

(ii) the credit risk unit, that independently manages the risk, provides policy guidance, performs credit analysis, risk reporting and credit monitoring. Our credit risk unit comprises of various sub-units, such as credit underwriting, policy unit and portfolio monitoring unit, which are responsible for management of credit risks; and

(iii) the internal audit unit, which independently assesses the design and operational effectiveness of the entire credit risk management framework. Our credit risk governance framework incorporates the requirement of senior management and credit committee approval, with built-in escalation matrices at pre-defined credit thresholds, which enables us to ensure that high-ticket advances are sanctioned by our senior management. We have implemented enterprise-wide loan management system, OmniFin, which provides single platform operational support such as risk management, documentation management and customer service and consequently aids our decision making. We have integrated OmniFin with services of third-party credit assessment service products, Perfios - Insight to increase the operational efficiency of loan disbursement and risk assessment processes. We believe that our streamlined credit risk governance framework and loan management system have contributed to our operational efficiency and enhances our ability to take prudent credit decisions.

Our Strategies

Focus on Emerging Corporate / SME segment borrower category:

Emerging corporates and SME players add to the growth story of India. As part of Portfolio diversification strategy, your company intends to lend to this segment which is fast growing and provides a healthy Portfolio on Companys balance sheet. Your Companys management has decade long experience in Financial services and understands this segment so as to lend judiciously.

Further strengthening credit assessment and risk management procedures: In line with our institutional philosophy of implementing prudent risk management controls, we continuously endeavor to strengthen various aspects of our credit and risk management, including credit assessment and due diligence procedures for appraisal of the borrowers credit worthiness and mitigation of the credit risk. We are committed to efficiently maintain healthy and high-quality loan asset portfolio. In relation to origination and appraisal of our advances, we propose to continuously review and upgrade our credit risk governance framework, including enhancing our resources. In addition, we have integrated our loan management system, OmniFin with services of third party credit assessment service products, such as Perfios - Insight, which we believe would increase the operational efficiency of loan disbursement and risk assessment processes. Leverage on the relationship and experience of our senior management for business growth: We intend to continue growth at a stable but steady pace. Therefore, instead of focusing on opening of new branches, we wish to leverage the experience and business relationships of our senior management to grow our business. Our new senior management has a diversified track record that can help us identify suitable customers across industries which meet our risk appetite. We also believe our senior managements acumen of the market trends, demands and industry developments, would enable us to adapt and take advantage of market opportunities.

RISK MANAGEMENT

Risk management forms an integral part of Companys business. As a NBFC, the Company is exposed to various risks related to its lending business and operating environment. The objective is to evaluate and monitor various risks that the Company is subject to and follow stringent policies and procedures to address these risks. Effective risk management forms the core of our business. Our credit risk management process encompasses astute underwriting, structuring & regulatory checks, coupled with appropriate credit & approval delegation & monitoring of the portfolio at regular interval. Our team of seasoned professionals continuously monitor risk and suggest early measures to control risk at minimum level. We have also established effective risk management systems, policies & internal controls to address various other types of risk viz operational risk, liquidity risk, market risk, compliance & regulatory risk. Our focus on developing sector expertise across our products segments helps us constantly monitoring event risks. The Companys Risk Management Committee assists the Board in addressing various risks and discharges duties relating to corporate accountability. The Risk Management Committee reviews the effectiveness of risk management systems in place and ensure that they are effectively managed. It also provides an independent and objective oversight on corporate accountability and risks and considers reports of the Audit

Committee on all categories of identified risks.

POSSIBLE THREATS

Our Industry has faced certain challenges in the period under review, related to Liquidity and defaults by Large Companies, therefore there may be significant roadblocks to the growth of the Company in shorter term. Default and delay by a number of large and small established financial companies is likely to cause certain short-term variances and may make it difficult for the Company to raise debt in near future. Even the fall in Interest rates have not boosted the Liquidity for NBFCs, and there has been instances of Rating downgrades of NBFC and certain Housing Finance Companies, of which Reliance Home Finance is the recent example. Changes in interest rates are expected to have significant impact on the Companys business and operations. Finance costs are dependent on various external factors, including Indian and global credit markets and, in particular, interest rate movements and adequate liquidity in the debt markets. Changes in RBI repo rates could affect the interest charged on interest-earning assets and the interest rates paid on interest-bearing liabilities. Adverse conditions in the global and Indian economy resulting from economic dislocations or liquidity disruptions may adversely affect availability of credit, and decreased liquidity may lead to an increase in interest rates. Despite recent push by the RBI, the resolution of stressed assets in the system is likely to take more time. Also, the effect of various loan waivers on credit culture in the rural areas is still to be seen. Your Company acknowledges these possible negative factors and has a plan to mitigate them through its deep domain knowledge, strong risk framework and an efficient collection mechanism under the stewardship of the management team.