Sumedha Fiscal Services Ltd Management Discussions

GLOBAL ECONOMY: A YEAR OF STABILIZATION UNDER PRESSURE

As we look back on FY 2025-26, it was a year defined by a high-stakes transition. We began the period hoping for a "soft landing" after years of post-pandemic volatility, and while we largely achieved that, the path was shaped by a complex mix of regional instability and rapid technological disruption that forced us to rethink our strategies in real-time.

A Year of Resilience Amidst Fragmentation

Global GDP growth for the 2025-26 period tracked at approximately 3.2%. This figure, however, masked a significant divide between regions. The United States maintained a steady momentum, largely supported by a massive investment cycle in AI infrastructure that helped offset the impact of high interest rates. Similarly, India continued to be a primary engine of growth, benefiting from robust domestic consumption and a successful push into high-tech manufacturing.

In contrast, Europe and China navigated more difficult terrain. Europe grappled with the long-term structural costs of its energy transition, while China dealt with a prolonged real estate correction and a shift toward an export-heavy industrial model that created fresh trade tensions globally.

Key Economic Drivers and Challenges

• Geopolitical Friction: Over the past year, trade policy became a tool of national security. We saw a marked trend of "friend-shoring," where supply chains moved to allied nations to mitigate risks from ongoing friction between major powers over critical technologies like semiconductors.

• The Inflation "Last Mile": While the era of runaway inflation is now behind us, the "last mile" proved to be sticky. Central banks kept rates at restrictive levels for most of the year, keeping the cost of capital high for debt-heavy sectors like real estate and traditional manufacturing.

• The Productivity Pivot: A major bright spot in FY 2025-26 was the tangible productivity gain emerging from Artificial Intelligence and automation. Businesses moved beyond the experimental phase, embedding AI into core operations to combat labor shortages and rising costs.

• The Energy Milestone: Clean energy investment reached record levels this past year, estimated at over $2.4 trillion. However, the rapid expansion of AI data centers created a global "power crunch," making grid modernization a top priority for both governments and corporations.

• Strategic Reflection: FY 2025-26 was a period where broad recovery was replaced by a landscape where performance was defined by regional positioning and sectoral strength. Companies that successfully navigated high energy costs and secured their supply chains against geopolitical shocks are the ones that have emerged with a path to sustainable growth as we move into the next cycle.

Note on Sources: This retrospective integrates 2026 data and outlooks from the IMF and OECD , finalized policy stances from the Federal Reserve and RBI, and year-end analysis from S&P Global and McKinsey regarding the 2025-26 technology and energy shifts.

As we evaluate the progress in May 2026, the Indian economy is showing remarkable resilience, having recently closed the 2025-26 fiscal year with a surprisingly robust growth rate of 7.6%·well ahead of initial projections. While the global landscape is increasingly fragmented, Indias "double engine" of domestic consumption and steady investment has kept it as a top performer among major nations.

INDIAN ECONOMY: RECENT PERFORMANCE AND OUTLOOK

• Growth Trajectory: Following the 7.6% expansion in the year just ended, growth for the current 2026-27 fiscal year is projected to settle into a sustainable range of 6.8% to 7.2%.

• Consumption Dynamics: Private expenditure has been a standout, rising to account for 61.5% of GDP. This shift reflects a more confident urban consumer and a steady recovery in rural areas, where strong agricultural performance is finally starting to translate into higher purchasing power.

• Investment & Industry: Infrastructure remains a core priority, with Gross Fixed Capital Formation (GFCF) holding steady at 30.0% of GDP. Manufacturing is particularly active, growing at over 8% in early 2026, fueled by the rationalization of GST and continued momentum from Production-Linked Incentive (PLI) schemes.

MACROECONOMIC STABILITY UNDER PRESSURE

• Inflation Management: Managing price levels has been a balancing act. Headline inflation (CPI) hovered around 3.48% in April 2026. While this is well within the target range, we are seeing some pressure from rising food prices and a "power crunch" caused by the energy demands of new digital infrastructure.

• Monetary Policy: In response to these manageable pressures, the Reserve Bank of India (RBI) has slightly eased its stance, maintaining the repo rate at 5.25% as of April 2026 to support continued growth while keeping an eye on external shocks.

• Fiscal Discipline: The government successfully narrowed the fiscal deficit to 4.4% of GDP for the 2025-26 cycle, down from 4.8% the previous year. This improvement was driven by strong tax collections, with net GST revenue continuing to grow at a healthy 7.1% annually.

EXTERNAL CHALLENGES AND FOREX

• Trade and Currency: The Current Account Deficit (CAD) has faced renewed pressure recently due to a spike in global oil prices and record-breaking gold imports.

• Foreign Reserves: To stabilize the rupee, which recently touched the 95 per dollar mark, the RBI utilized its buffers. Foreign exchange reserves, while still substantial, declined to approximately $691 billion by May 2026. This has led to calls for "economic austerity" regarding non-essential dollar outflows like luxury travel and gold.

Looking ahead, the focus is shifting toward unlocking "idle" domestic assets·such as household gold·and further streamlining regulatory bottlenecks to ensure India remains a preferred destination for long-term Foreign Direct Investment (FDI).

Source: The insights above are drawn from recent publications by Ministry of Statistics (MOSPI), RBI and Ministry of Finance.

As we assess the landscape in May 2026, Indias M&A market has transitioned into a "value-led" recovery phase. Following a pronounced resurgence in 2025, total deal values (including outbound) climbed 12% to 18%, reaching a record range of US$115 billion to US$123.8 billion. The market is currently defined by a preference for high-conviction, strategic assets over speculative volume, with a notable surge in inbound interest despite global trade frictions.

KEY DRIVERS OF M&A ACTIVITY

• Strategic Consolidations and Large-Ticket Deals: Domestic consolidation remains the primary anchor of the market, accounting for nearly 78% of M&A value in early 2026. Strategic activity is concentrated in resilient, domestically anchored sectors such as Financial Services, Industrials, and Auto, which saw deal values jump over 100% in the past year.

• Private Equity Evolution: PE activity has matured, shifting from broad large-cap dealmaking toward disciplined, control-oriented buyouts. While total PE-VC investment moderated to approximately US$36 billion in 2025, deal volumes remained resilient as capital gravitated toward Deeptech (AI and semiconductors), healthcare, and renewable energy.

• Enhanced Policy and Trade Frameworks: Regulatory certainty has been bolstered by the 2026 Union Budget, which introduced tax holidays for cloud service providers and incentives for biopharma and semiconductors. Furthermore, new trade agreements·including the India-UK FTA (effective April 2026) and the India-EFTA TEPA (effective October 2025)·are expected to drive significant cross-border capital inflows.

• Surge in Cross-Border and Inbound Interest: Cross-border M&A value jumped 155% to US$33.2 billion in 2025. Major inbound moves include Emirates NBDs US$3 billion acquisition of a controlling stake in RBL Bank and Capgeminis US$3.3 billion buyout of WNS Holdings, reflecting deep global confidence in Indias long-term growth story.

OUTLOOK FOR 2026-27

Entering the new fiscal year, M&A activity is expected to remain resilient, though dealmakers are adopting a more selective approach due to global geopolitical volatility. Infrastructure, Green Energy, and Technology (linked to AI demand) remain the key growth areas. With structural supports like RBI rate reductions and a signed EU-India trade framework, the market is poised for a more mature, high-value dealmaking environment.

Source: Insights are derived from recent reports by industry analysts, financial institutions, and global advisory firms.

The Alternative Investment Funds (AIF) sector in India has maintained its strong trajectory, cementing its role as a vital pillar of the national financial landscape. As of May 2026, the industry has achieved a historic milestone, with total commitments surpassing Rs. 15.74 lakh crore. This reflects a significant leap from the Rs. 11.35 lakh crore recorded in March 2024, continuing the sectors rapid expansion.

Growth Drivers

• Regulatory Modernization: SEBI continues to refine the AIF landscape to improve transparency and ease of doing business. A new AIF regulatory reporting framework was introduced in 2026, simplifying compliance by replacing detailed quarterly filings with a more integrated annual activity report.

• Enhanced Transparency: New 2026 mandates now require AIFs to report the value of units to depositories, ensuring that private asset reporting standards are increasingly aligned with public market transparency.

• Operational Flexibility: SEBI has introduced a "lighter-touch" regulatory framework for AI-only Funds (limited to accredited investors), alongside operational flexibilities such as a "Dissolution Period" to help managers navigate unliquidated investments after a funds tenure expires.

• Sectoral Concentration: Investment remains heavily focused on high-conviction sectors including Deeptech (AI and semiconductors), renewable energy, and healthcare, attracting sophisticated High Net Worth Individuals (HNIs) seeking superior risk-adjusted returns.

Market Outlook

The AIF industry is well on its way to achieving a projected five-fold increase in AUM by 2034, with total commitments estimated to exceed Rs. 100 lakh crore by 2030. Category II AIFs·comprising private equity and private credit·remain the dominant mainstream choice, currently accounting for over Rs.11.64 lakh crore of total industry commitments. Sustained growth is expected to be fueled by AI-driven investment strategies, global market diversification, and a favorable regulatory environment that supports niche product innovation.

Source: The insights above are based on the latest industry reports, SEBI regulations, and financial publications.

BUSINESS OVERVIEW

Highlights of Financial Performance during FY 2025-26

Total Income from Operation of Rs. 10943.19 Lacs (Rs. 10157.97 Lacs for FY24-25)

• Profit Before Tax of Rs. 309.57 Lacs (Rs. 848.76 Lacs in FY24-25)

• Net Profit of Rs. 237.63 Lacs (Rs. 658.64 Lacs in FY24-25)

• Basic EPS after extra ordinary items stood at Rs. 2.98, compared to Rs. 8.25 in FY24-25

Sumedha Fiscal Services Limited is a distinguished player in the Indian financial services landscape, specializing in debt syndication, financial restructuring, and corporate advisory. The Company excels in managing both private placements and public issues of equities and debt, offering a broad range of fee-based services, including fund mobilization through debt, quasi-equity, and structured hybrid instruments. Serving a diverse set of premier public and private corporates, Sumedha Fiscal Services Limited is recognized for its comprehensive and integrated approach. With an unwavering commitment to its vision of ‘adding values to value the Company consistently delivers exceptional value to its clients in every engagement.

The Investment and Merchant Banking sector in India has transitioned into a high-growth phase as of May 2026, following a landmark FY 2025-26 that saw the market size expand toward a projected Rs.25,000 crore by 2028. This momentum is underpinned by a "seismic change" in how Indian corporates access capital, moving beyond traditional debt to sophisticated hybrid and convertible instruments.

INVESTMENT AND MERCHANT BANKING: SECTOR EVOLUTION

• ECM and IPO Resurgence: After a record-breaking 2025, which was the busiest year for IPOs since 2021, the 2026 ECM market has entered a period of exceptional activity. Investors have shifted focus toward companies demonstrating durable revenue and "clear competitive moats," particularly in technology and defense sectors.

• Alternative Financing: The convertible bond market saw a 35% year-over-year increase in 2025, with larger, high-quality issuers adopting these instruments as a core part of their financing strategy.

• Technological Shift: By 2026, the use of AI-powered compliance engines and risk modeling has become a "strategic necessity" for the sector. These tools are significantly reducing false positives in fraud detection (by 30-50%) and enabling real-time automated regulatory reporting.

Macro-Financial Environment (FY 2025-26)

• Growth & Retail Participation: Real GDP is projected to grow by 6.3% for FY 2025-26, supported by a massive expansion in the retail investor base. Unique investors in India crossed the 12-crore mark in late 2025, with nearly a quarter being women-a significant milestone for financial inclusion.

• Regulatory Resilience: The Financial Sector Assessment Program (FSAP) conducted by the IMF and World Bank in 2025 validated the resilience of Indias financial system, noting that capital markets have expanded to 175% of GDP.

• New Directions: Effective January 1, 2026, the RBI introduced new restrictions on regulated entities investments in Alternative Investment Funds (AIFs), aiming to manage related exposures more prudently.

Corporate Focus: Sumedha Fiscal Services Limited

• Segment Performance: Investment Banking remains the primary engine of the Companys growth. This segment, which contributed Rs.962.59 lacs in FY 2025-26, has seen its role expand as the firm navigates the increasingly complex regulatory and technological landscape of 2026.

• Strategic Positioning: The firm continues to leverage its expertise in debt syndication and corporate advisory, aligning with the broader sector trend of utilizing technology for enhanced risk management and operational efficiency.

RISK MANAGEMENT: FORGING RESILIENCE IN A DYNAMIC LANDSCAPE

At Sumedha Fiscal Services Limited, we view risk management not merely as a compliance obligation, but as a strategic pillar that safeguards our stakeholders and ensures the long-term sustainability of our value-creation model. Our framework is designed to be as dynamic as the markets we operate in·continuously evolving to identify, assess, and mitigate a broad spectrum of internal and external threats.

Integrated Governance and Oversight

Our risk strategy is deeply embedded within our decision-making structure. While the Company is not currently required to maintain a formal Risk Management Committee under Regulation 21 of the SEBI (LODR) Regulations, our internal systems are robust and fully commensurate with our business complexity.

• Board-Level Accountability: Significant risks across strategic, financial, and operational domains are reviewed quarterly by the Audit Committee and the Board of Directors.

• Proactive Mitigation: Our governance ethos ensures that risk identification is proactive rather than reactive, allowing for timely intervention across all business functions.

Navigating the 2026 Risk Horizon

The financial landscape in 2026 is defined by rapid digital evolution and heightened macroeconomic uncertainty. To maintain our resilience, we have refined our focus in several critical areas:

• Digital & AI Governance: As the industry adopts Agentic AI and autonomous decision-making tools, we have prioritized managing "model risk" and ensuring data integrity to prevent algorithmic bias.

• Cyber Resilience: Recognizing that cybersecurity is now a national strategic issue, we continue to fortify our IT infrastructure against increasingly sophisticated threats, moving beyond basic detection to a strategy of continuous monitoring and rapid incident response.

• Regulatory Recalibration: We proactively adapt to shifting compliance landscapes, integrating updated regulatory frameworks designed to enhance investor services and restructure guidelines for high-value debt entities.

Operational Strength and Future Outlook

Backed by a sound capital base, prudent liquidity management, and a pan-India presence, the Company is exceptionally well-positioned to pursue growth while maintaining a defensive posture against market volatility. Our approach remains grounded in the lessons learned across previous economic cycles, ensuring that as we scale, our commitment to ethical standards and stakeholder trust remains unshakeable.

RISKS AND CONCERNS

The Company is subject to following broad risks -

• Operational Risk-

The Companys operations are inherently reliant on the effectiveness of its people, processes, and internal systems. Any inadequacy or failure in these areas could potentially have a material adverse impact on its business performance and financial position.

To mitigate such risks, the Company has implemented a robust internal control framework and conducts regular audits and process reviews to ensure operational efficiency and compliance. Its key management personnel and operational teams comprise experienced professionals with a high degree of expertise and commitment, ensuring sound execution and oversight of business activities. This proactive approach significantly reduces the likelihood of disruptions arising from operational lapses or process inefficiencies.

• Market Risk-

Market risk arises from fluctuations in the value of financial instruments driven by volatility in variables such as equity prices, interest rates, currency exchange rates, credit spreads, and other asset prices. As a financial services intermediary, the Company is inherently exposed to these risks, particularly in relation to its proprietary trading and investment activities.

To manage and mitigate such exposures, the Company continuously monitors its investment portfolio, market positions, and risk thresholds. It employs prudent risk management practices, including the strategic use of derivatives and other hedging instruments, to safeguard against adverse market movements and ensure portfolio stability.

• Liquidity Risk-

Liquidity risk refers to the potential impact of adverse market conditions on the Companys ability to meet its short-term financial obligations, liquidate assets without significant loss, or access funding at reasonable costs. A severe market-wide liquidity crunch or disruption could also affect counterparties and clients, thereby indirectly impairing the Companys own cash flows and financial commitments.

To mitigate such risks, the Company maintains a prudent liquidity management strategy, including holding a portion of its capital in high-quality liquid assets to cushion against unforeseen short-term pressures. The business is well-capitalized and adopts a forward-looking approach to liquidity planning, focusing on building financial buffers and maintaining flexibility to navigate economic cycles. This disciplined approach enables the Company to sustain long-term stability despite temporary market volatilities.

• Regulatory and Compliance Risk

The Company operates in a highly regulated environment, and any changes in laws, rules, or regulatory interpretations affecting its business segments may have a material impact. Regulatory risk may also arise from non-compliance, delayed implementation of regulatory requirements, or differing interpretations between the Company and regulatory authorities.

To mitigate such risks, the Company has established a robust compliance framework supported by dedicated teams of professionals who ensure adherence to all applicable legal and regulatory obligations. Regular internal audits are conducted to assess compliance with statutory requirements and internal policies. Where necessary, the Company seeks expert external legal and professional advice to ensure full alignment with the evolving regulatory landscape and to proactively address any potential areas of concern.

• Reputation Risk

Reputation is a critical asset for the Company, directly influencing stakeholder trust, client retention, and long-term business sustainability. While a strong reputation is built through consistent delivery of high-quality services, integrity, and client-centricity, it remains vulnerable to a wide range of external and internal factors that can cause significant and sometimes irreversible damage.

The Company places the highest importance on preserving its reputation, which has been earned through decades of trusted advisory and financial services. It fosters a culture of accountability and excellence across all levels of its operations. A dedicated and professionally committed workforce upholds the Companys core values, ensuring that all interactions reflect ethical standards, client trust, and stakeholder confidence.

INTERNAL CONTROL SYSTEMS

The Company has instituted an internal control framework that is commensurate with the scale and complexity of its operations. This system is structured to ensure strict compliance with applicable laws and regulations governing its business activities. The internal financial controls relating to the preparation of financial statements are assessed to be adequate and effective. These controls are designed to safeguard the Companys assets, ensure the accuracy and integrity of its accounting records, prevent and detect frauds and errors, and facilitate the timely preparation of reliable financial information.

There has been no material developments in the area of Human Resources.

The Company had 49 permanent employees during the year under review.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOR:

Ratios	2025-26	2024-25	Variance	Reason for Variance
Debtor Turnover	0.03	0.03	No significant change	No significant variation during the year.
Inventory Turnover	0.15	0.14	7.14%	The marginal improvement is attributable to a slight increase in inventory movement during the year.
Operating Profit Ratio%	0.04	0.09	(55.56%)	Decrease due to lower operating margins during the year.
Net Profit Ratio%	0.03	0.06	(50.00%)	Decrease due to lower net profit during the year.
Debts Equity Ratio %	-	-	NA	Not applicable as the Company has no borrowings.
Interest Coverage Ratio %	-	-	NA	Not applicable as the Company has no interest-bearing debt.
Current Ratio %	57.37	50.63	13.31%	Increase due to improved liquidity position.
Return on Networth %	3.91	11.14	(64.90%)	Decrease due to lower profit after tax during the year.

Cautionary Statement

This Management Discussion and Analysis provides the details of the Company objectives. Statements detailed here are not exhaustive but are for information purposes only. The actual performance of the Company in future may vary substantially from those outlined herein. Some of the statements written herein are forward looking and should not be construed as a guarantee of performance. The readers must exercise their due diligence before forming any opinion based on this statement.