Step Two Corporation Ltd Management Discussions

About Step Two Corporation Limited

About Step Two Corporation LimitedStep Two Corporation Limited (STCL) is a non-deposit taking Non-Banking Financial Company (NBFC-ND) registered with the Reserve Bank of India (RBI). It is engaged in the business of investments and lending

Industry and Economic Scenario

Global economy

The global economy in CY 2025 held its ground, sustaining moderate growth through a period defined more by resilience. Technology-led investment and steady services demand provided the principal support, even as elevated borrowing costs and headwinds from geopolitical tensions continued to weigh on sentiment. Consequently, the tone shifted from stabilisation to caution in the latter part of the fiscal, as downside risks increasingly dominate the outlook.

The regional picture reveals a sharp divergence. Advanced economies, constrained by various factors, are expected to remain subdued. Emerging and developing economies, by contrast, have sustained stronger momentum, supported by domestic consumption, infrastructure development and favourable demographics. Asia continues to drive incremental global growth, spearheaded by robust momentum in India and steady performance in China.

This divergence is increasingly visible in global trade flows. As demand patterns shift and policy priorities turn more inward-looking, world trade growth is expected to slow before a modest recovery. The deceleration is structurally driven by a rise in protectionist measures, which now impact over 11% of global imports. Intensifying tariff wars between major economies have disrupted trade flows, increased costs and added friction to global commerce. Ongoing tensions in the West Asia conflict have added severe supply side uncertainties, particularly affecting energy markets and critical maritime choke points. Policy uncertainty has compounded this fragmentation further.

Against this backdrop, the global economy faces a delicate balance of risks where downside scenarios now firmly dominate. Downside risks, including further geopolitical escalation in West Asia, financial market corrections particularly in AI-driven valuations and persistent inflation could severely disrupt the current stability. Conversely, a sustained easing of trade tensions and tangible productivity gains from AI adoption could support stronger medium term growth. The trajectory for CY 2026 and ahead will therefore depend on how these interconnected forces evolve, determining whether the current stabilisation transitions into renewed expansion or remains constrained by deepening structural and geopolitical headwinds.

Indian economy

Indian economy India entered FY 2025-26 as one of the worlds fastest-growing major economies and the year reinforced that position. Real GDP is estimated to have expanded at a robust pace of 7.6% in FY 2025-26, as highlighted in the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) review of April 2026, with growth remaining broad-based across consumption, investment and sectoral activity. Private Final Consumption Expenditure expanded contributing the largest share of GDP, reflecting stable urban demand and a gradual recovery in rural consumption. Gross Fixed Capital Formation rose, sustaining investment levels at around 30% of GDP, driven by infrastructure creation, manufacturing expansion and capacity additions. Services remained the primary growth engine, while industrial growth also strengthened, aided by infrastructure activity, construction momentum and improved capacity utilisation.

This credit momentum was underpinned by a banking system in robust health. Gross NPAs of the scheduled commercial banks continued to decline, reaching multiyear lows of around 2.0% by the end of FY 2025-26 and capital adequacy remained at comfortable levels, providing adequate buffers to support growth. Improved asset quality trends and stronger provisioning coverage contributed to a healthier credit environment. Capital markets also witnessed strong mobilisation, reflecting deepening financialisation of household savings and diversified funding avenues for NBFCs and corporates. Stable funding access, diversified liability profiles and prudent asset-liability management remain critical considerations for NBFCs as the rate cycle evolves.

Looking ahead, India is positioned to transition from cyclical recovery to a phase of more durable, structurally anchored expansion. Domestic demand is likely to remain the principal growth driver, supported by improving income dispersion across urban and rural segments, sustained public investment in infrastructure and a gradual broadening of private capital formation. Economy-wide formalisation, deepening digital integration and policy emphasis on manufacturing competitiveness and MSME development are expected to strengthen productivity and supply-side capabilities. For financial services institutions operating in this environment, the combination of a growing credit-seeking population, improving asset quality and a supportive policy backdrop present a compelling medium-term opportunity.

INDUSTRY OVERVIEW

Non-banking financial company (NBFC) industry overview

Indias NBFC sector is on a sustained growth trajectory, with assets under management (AUM) expected to surpass 50 Lakh Crore in FY 2026-27 excluding government-owned NBFCs, as per CRISIL Ratings. NBFC credit growth has historically outpaced Indias GDP growth and this trend is expected to continue. The AUM growth trajectory reflects both its expanding relevance and demonstrated resilience within Indias financial ecosystem.

The near-term outlook remains constructive. For FY 2026-27, momentum is expected to gain further pace in specialised segments like Consumer Durable financing, with NBFC market share projected to reach 63%. Growth trajectories will nonetheless vary across segments, shaped by risk calibration, regulatory oversight and funding access. Balance sheet strength and funding diversification remain the critical differentiators.

Financial Performance

Balance Sheet

Total net fixed assets for FY2025-26 stood at Rs. 12.23 lacs compared to Rs.0.48 lacs in FY2024-25

Net worth stood at Rs. 842.51 lacs as on 31st March, 2026 compared to Rs. 562.19 lacs as on 31st March, 2025, an increase of 14.994%.

Profit and loss statement

Revenues from operations stood at Rs. 320.49 lacs in FY2025-26 compared to Rs. 130.31 lacs in FY2024-25

EBITDA decreased to Rs. (224.04) lacs in FY2025-26 compared to Rs. (2.29) lacs in FY2024-25

Loss after tax was witnessed at Rs. (191.81) lacs in FY2025-26 compared to Rs.(2.39) lacs in FY2024-25

Depreciation and amortisation stood at Rs. 1.60 lacs in FY2025-26 compared to Rs. 0.21 lacs in FY2024-25

Key financial ratio - Significant changes and explanations

Ratio	FY 2025-26	FY 2024-25	Changes
Debtors Turnover (Days)	-	-	-
Inventory Turnover	55.76%	-	100%
Interest Coverage Ratio	-	-	-
Current Ratio (with short term borrowings)	193.91	71.38	172%
Debt Equity Ratio	NIL	NIL	NIL
Operating Profit Margin (%) (EBIT Margin)	-79%	-6%	1214%
Net Profit Margin (%) / PAT	-60%	-2%	3160%
Return on Net Worth/ Average Equity	-23%	0%	5250%
EBITDA Margin	-70%	-6%	1107%
Earnings per share (Rs.)	(2.62)	(0.06)	4548%
Fixed Asset Turnover Ratio	50.43	255.68	-80%
Return on Average capital employed	-27%	-1%	1841%

Figures for Debtors Turnover (Days), Inventory Turnover and Interest Coverage Ratio have not been stated since the Company had Nil Debtors, Inventory and Interest Expense.

Risk Management

HDBFS operates in an environment of multiple, interconnected risks such as credit, operational, liquidity, digital lending and information security. The Company manages these through a comprehensive risk management framework designed for proactive identification and mitigation. The Board of Directors maintain oversight across all risk categories, supported by dedicated committees that ensure focused supervision and stringent controls.

The Company continuously strengthens its security infrastructure, particularly in cybersecurity, to defend against emerging threats and remains confident in its ability to safeguard financial stability, operational efficiency and market reputation.

Evolving Regulatory Landscape

Over the past few years, financial services as a sector has come under increased scrutiny and therefore, greater regulatory supervision. This is especially true for NBFCs, as over the years, the sector has undergone considerable evolution in terms of size, complexity and interconnectedness within the financial sector. With a view to bridge the regulatory gaps between the Banks and NBFCs, NBFCs are now increasingly being subject to regulations and guidelines at par with banks.

Opportunities and Threats

India continues to chart a robust growth path, with the IMF projecting it to become the worlds fourth-largest economy by nominal GDP, estimated to be $4.2 trillion in CY2025. This growth is underpinned by strong drivers including private consumption, a resilient services sector, and focused government expenditure. Additionally, the expanding MSME base, accelerating digital adoption, and a favourable demographic dividend further strengthen the countrys long-term prospects. Central to this growth trajectory is the financial services sector, which plays a vital role in enabling business expansion, consumer spending, and infrastructure development.

Government initiatives to boost MSME activity, coupled with the limited reach of traditional credit channels in remote areas, create a conducive environment for customized financing solutions. NBFCs, with their extensive reach, flexible underwriting practices, and digital agility, are uniquely positioned to bridge this gap and drive financial inclusion.

In terms of challenges, from a macroeconomic standpoint, NBFCs operate within a landscape susceptible to external factors viz. political developments, geopolitical tensions, systemic liquidity constraints, fiscal uncertainties, and inflationary pressures which may influence interest rates and borrower behaviour. These factors necessitate robust risk management frameworks and diversified funding strategies to withstand shocks and sustain growth.

NBFCs continue to face an increasingly competitive environment. Margin pressures persist due to competitive lending rates, especially as banks further deepen their reach and intensify their focus on retail and MSME lending, compressing spreads for NBFCs. Smaller NBFCs, in particular, struggle with limited access to affordable and stable funding sources, which constrains their ability to scale operations and maintain liquidity buffers.

Your Company ensures strict adherence to regulatory guidelines, ensuring compliance in both letter and spirit. With a well-articulated strategy, robust operating model, and high standards of corporate governance, STCL remains well-positioned to capitalize on the opportunities ahead.

Internal control system and their adequacy

The Company has an effective internal control system, commensurate with its size and nature to ensure smooth business operation, including assurance of recording all the transaction details, ensuring regulatory compliance and protecting the Company assets from any kind of loss or misuse. 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. The Company has further strengthened its internal audit function by investing in domain specialists to increase effectiveness of controls. The Audit Committee of the Board of Directors reviews the internal audit reports and the adequacy and effectiveness of the internal controls.

Fulfillment of the RBIs norms and standards

STCL fulfils norms and standards laid down by the RBI relating to the recognition and provisioning of non-performing assets, capital adequacy, statutory liquidity ratio, etc.

Development in human resources

The Company continues to lay emphasis on people, its most valuable resource. In an increasingly competitive market for human resources, it seriously focuses on attracting and retaining the right talent. It provides equal opportunity to employees to deliver results.

Conclusion

Certain statements in the Management Discussion and Analysis describing the Companys objectives, predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties.