Sterling Guaranty & Finance Ltd Management Discussions

Annexure-1 Annexure to the Directors Report

Management Discussion and Analysis

for the Annual Report 2024-25

Discussion on financial performance with respect to operational performance

Financial Review: The Company has net loss of Rs. 17.09 lacs for the financial year ended 31^st March, 2025 as compared to loss of Rs 7.44 lacs in the previous year. The Company has negative Net worth as on 31^st March, 2025 of Rs. (93.59) Lakhs.

The Company needs further capital infusion.

Industry Structure and Developments, Opportunities and Challenges of Core Business:

The Company has 35 years experience of financial services in India. Range of services include as Tax Advisory on investments, Risk Advisory and Security Valuation, Arbitrage Strategy and Investment. These services are rendered in diverse terms and forms to meet the group demands.

The Financial sector continues to face competitive pressures from the banking sector and financial institutions, due to their increased penetration in the Securities market, with comparatively low cost of funds at their disposal. There has been change in the management of the Company during the year under review. The new management is making its best efforts to regain the business of the Company.

Since, the Company is in process of regaining the business of the Company, there are no updates on the Industry Structure and its Development.

Legal Consultancy

Our legal advisory services aim to ensure strict compliance with relevant compliance regulations of MCA, NSE, BSE, SEBI, RBI and Income Tax. Company Legal Compliance is now viewed as a separate service because of its complexity and because it is becoming more complex. We help interpret and comply with the rules and regulations in order for clients to continue to operate in their chosen sectors. There are many sections of the Companies Act where we are in a position to provide guidance and/or assistance with interpretation pertaining to Company Law and Income Tax, secretarial matters, Accounting matters such as statutory disclosures, deadlines and ICAI Standards, Matters affecting share capital, Statutory provisions relating to various meetings like AGM, EGM and BOD. Matters related to Ministry of Corporate Affairs & SEBI, Company Law Compliance, SEBI Regulations and Compliance etc.

Areas of practice:

Company Law Matters concerning legality, management obligations, transfers, investigation etc.

Advisory services in corporate law matters including FEMA, foreign direct investment, ECBs, takeovers, securities laws, stamp law, etc. Indirect taxation queries and compliance of GST. Mergers, de-mergers, corporate restructuring, schemes and arrangements. Company law formalities such as incorporation, Board Structure, Statutory Compliance, Audit Committee, Risk Management Committee, Nomination and Remuneration Committee, Shareholder relationship committee.

Investment Consultancy:

As an investment consultant we provide investors with investment products, advice and/or planning. Our advisory is based on Long-term, responsible and enterprising investing, a rational framework a based on fundamental analysis draws support from Quantitative, Technical, Global and Domestic Macro Analysis. We do in-depth work on formulating clients investment strategies, helping them fulfill their needs and reach their financial goals and make suitable investment decision. We advise on various kinds of opportunities available in the market which includes:

Arbitrage

“Arbitrage is the coordinated purchase and sale of shares in cash and futures market and or between different series of Futures to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. If the Company takes one side risk in buying or selling the return increase.

Investment in Securities

The Company has in his team of Directors and employees have more than 50 years experience of securities market. Major Equity Securities in Nifty 50/ Sensex are tracked for their price movement, trading data, volatility and related news & events. This enables the Company to Invest in Cash Market and sale or sale in derivatives and buys. Mostly the decision remains on profit side but if it turns out not as per expectations then security is hold for delivery and/or traded out or averaged.

Experience of the Company has been encouraging. Depending on funs deployed it can generate adequate profitability to service the Capital.

Dealing in Business of Stressed Assets

The stressed asset investment landscape in India has come of age and the time is ripe for discerning investors to step in and pick “value" assets. Over the last two years, there has been a remarkable change in the resolution process for non-performing loans (NPLs) on banks balance sheets. While India has had a fair share of stressed assets at regular intervals, investors have stayed away from the space in the absence of robust legal, regulatory and resolution frameworks. Lacks of creditor-friendly laws have allowed promoters to exploit the system and banks have continued “ever greening" loans with lax oversight. The Insolvency and Bankruptcy Code (IBC) and RBI stance have changed the game. It has given stressed asset resolutions a legal structure, well-defined processes, responsibilities and timelines. The initial cases before the National Company Law Tribunal (NCLT) indicate that the authorities are being proactive in ironing out new challenges.

Distressed asset investments are exciting because of their inherent “buy low-sell high" potential and low correlation to other asset classes. The emphasis is on buying good underlying assets with potential for a turnaround, at reasonable valuations. As investors in a distressed asset, it is crucial to perform in-depth due diligence to avoid traps, whether related to pricing, litigation or operations.

Unlike a blue-chip equity investment, distressed asset investments need considerable handholding after the initial financial assistance. It is important that the market begins to see value in the business, as the price you can command at exit would depend on this. Apart from capital restructuring, excess value can be created by changing the management, aligning incentives for stakeholders and restructuring operations and setting liabilities

While global entities are waiting to see how the new frameworks play out, domestic ones have already started working actively in the space to acquire assets at discounted prices

With increasing competition in retail finance, banks and Financial Institutions are faced with unique challenge of providing competitive rates to secure more business for increased top line yet maintain a healthy bottom line.

Bottom line of banks and Financial Institutions get reduced due to high default percentages which are written off in books of accounts and termed as stressed assets or non-performing assets. Efficient management of the stressed asset offers significant tangible and intangible benefits to the financial services companies.

We offer tailored solutions based on the asset class. Our Company has experience of delivering great value for all asset classes which includes unsecured to secured and low ticket to very high ticket size borrowers. We also undertake skip tracing and field investigations to facilitate the collection output. Our affiliated team shares the status of each & every case on real time basis. To ensure banks and Financial Institutions control over recoveries all negotiations are routed to banks and Financial Institutions for approval through system, monetary collection is executed post valid approval from banks or as per the banks matrix. We sees good future in dealing the buying selling of stressed assets.

Outlook:

As discussed above the Company is hopeful of bright future in above core business

Internal Control System and their Adequacy:

The Company has adequate control system to ensure operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance of laws & regulations. The Audit Committee of Directors reviews the adequacy of internal control periodically.

Segment wise or product-wise performance:

Since, the Company is in process of regaining the business of the Company, there are no updates on the Industry Structure and its Development.

Material developments in Human Resources / Industrial Relations front, including number of people employed:

None

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including:

The same is forming part of the notes to the financial statements.

Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof:

The Company had a negative worth this year compared to previous year. However, the new management is hopeful of revival in the coming years.

Risk and Concerns:

The company is exposed to specific risks of interest rate fluctuations, credit risk, lack of resources which are peculiar to its businesses and the environment within which it operates. Statements in “Management Discussion and Analysis” describing the Companys objectives, projections, estimates, expectation or prediction may be “forward looking statements” within the meaning applicable securities law& regulations. Actual results could differ materially from those expressed or implied. Many unforeseen factors may come into play and affect results, which could be different from what the Management envisages in terms of performance and outlook.