Sungold Capital Ltd Management Discussions

The Board of Directors of your Company are pleased to present the Management Discussion and Analysis Report for the year ended 31st March, 2025.

The management discussion and analysis have been included in consonance with the code of corporate governance as approved by the Securities and Exchange Board of India (SEBI).

The Management Discussion and Analysis (MD&A) report provides insights into the financial performance, industry trends, opportunities, risks, and strategic direction of the Company for the year ended March 31, 2025. This report should be read in conjunction with the audited financial statements and notes thereto.

This report contains forward-looking statements that involve risks and uncertainties, including those related to the Companys growth plans and strategic direction. Actual results may differ materially. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Introduction

For Financial Year 2024-25 witnessed gradual economic stabilization following post-pandemic recovery cycles and geopolitical uncertainties. Indias GDP growth was estimated at ~6.8%, supported by resilient domestic demand, robust infrastructure spending, and sustained momentum in the services sector.

The NBFC sector?particularly Base Layer entities?remained instrumental in serving underbanked and unbanked populations. The operating landscape has been influenced by growing digital adoption and enhanced regulatory emphasis on governance and risk- based supervision.

Over the years, the Non-Banking Financial Companies (NBFC) sector has undergone significant transformation in terms of scale, operational capabilities, technological adoption, and diversification into new financial services and products. Both the number of NBFCs and the overall size of the sector have seen substantial growth. The sector now operates within an increasingly interconnected financial ecosystem, with deep linkages to banks, capital markets, and other financial institutions across both assets and liabilities. Additionally, the emergence of non-traditional players leveraging digital platforms has led to the development of innovative, technology-driven business models.

NBFCs have consistently played a crucial role in advancing financial inclusion across India. By complementing and supplementing the efforts of the banking sector, they have helped extend credit access to traditionally unbanked and underserved segments. One of their most significant contributions has been in supporting Micro, Small, and Medium Enterprises (MSMEs)?the backbone of entrepreneurship and innovation in the country. NBFCs possess a unique ability to understand the nuanced needs of these businesses and tailor financial products accordingly, positioning them as effective and agile credit delivery channels for the MSME sector.

Economic and Industry Overview:

FY 2024-25 witnessed gradual economic stabilization following post-pandemic recovery cycles and geopolitical uncertainties. Indias GDP growth was estimated at ~6.8%, supported by resilient domestic demand, robust infrastructure spending, and sustained momentum in the services sector.

The NBFC sector, especially the Base Layer entities, continued to play a vital role in reaching underbanked and unbanked segments. Increased digital penetration and regulatory focus on governance and risk-based supervision have shaped the operating environment.

Regulatory Landscape

The Reserve Bank of India (RBI) continues to focus on strengthening NBFCs through its Scale-Based Regulation (SBR) framework. Key regulatory developments in FY 2024-25 relevant to Base Layer NBFCs included:

• Enhanced disclosures and governance norms.

• Monitoring of customer protection and fair lending practices.

• Increased focus on KYC compliance and digital lending supervision.

The Company remains fully compliant with applicable regulations and has taken proactive steps to align with evolving guidelines.

Financial Performance Overview

The details of the financial performance of the Company is given below:

Particulars	For the year ended March 31, 2025	For the year ended March 31, 2024
Total Revenue	209.37	227.66
Total Expense (Excluding Depreciation)	203.81	223.17
Gross Profit before depreciation and tax	5.56	4.49
Net Profit After Tax	4.16	3.36
Balance of Profit brought forward	104.78	102.09
Balance available for appropriation	4.16	3.36
Earning Per Shares (EPS)
Basic	0.023	0.018
Diluted	0.023	0.018

During the year under review the Company has generated total revenue of Rs. 209.37 Lakhs as compared Rs. 227.67 Lakhs of the previous financial year. The Company achieved net profit of Rs. 4.16 Lakhs as compared to Rs 3.36 Lakhs in previous financial year. The directors are continuously looking for new avenues for future growth of the Company.

Key Ratios

Key Ratios on a Consolidated Basis

Ratio	Formula	Numerator	Denominator	CY	PY	%Variatio n	Reason
Current Ratio	[Current Assets/Current Liabilities)	Current Asset	Current Liability	0.02	0.00	419%	Due to decrease ICD Borrowings
Debt Equity Ratio	[Debt/Shareholders Equityl	Debt	Shareholders Equity	006	0.34	-82%	Due to decrease ICD Borrowings
Debt Service Coverage Ratio	[Net Operating Income/ Total Debt Service]*	Earning available for debt service*	Total Debt Service*			0%	NA
Return on Equity Ratio	[Profit after tax for the year/ Shareholders Equity]	Profit after tax	Average Shareholder s Equity	0.002	0.002	24%	NA
Inventories Turnover Ratio	[COGS/ (Average Inventories)]	COGS	Average Inventories	-	-	0%	NA
Trade Receivable s Turnover Ratio	[Revenue from Operations/ Average Trade Receivables]	Revenue from Operations	Average Trade Receivables			0%	NA
Trade Payables Turnover Ratio	[Total Purchases/ Average Trade Payables]	Total Purchases	Average Trade Payables				NA
Net Capital Turnover Ratio	[Revenue from Operations/ Average Working Capital]	Revenue from Operations	Working Capital	(1.33)	(0.30)	348%	Due to decrease ICD Borrowings
Net Profit Ratio	[Profit after Tax/ Revenue from Operations]	Profit after tax	Revenue from Operations	0.01	0.01	38%	Due to decrease ICD Borrowings
Return on Capital Employed	[EBIT/ Capital Employed*]	EBIT	Capital Employed*	0.022	0.027	-18%	NA
Return on Investment	[Profit after tax/ Capital Employed*]	Profit after tax	Capital Employed*	0.00	0.00	56%	Due to decrease ICD Borrowings

Risk ManagementThe Company follows a conservative and structured risk management approach. Key risks identified include:

• Credit Risk: Mitigated through stringent underwriting and early warning systems.

• Liquidity Risk: Adequate ALM planning; no mismatch in short-term buckets.

• Operational Risk: Periodic audits, IT security controls, and staff training in place.

As of FY 2025, the Company maintains a strong liquidity buffer and high-quality loan book.

Internal Control Systems

The Company has implemented internal controls commensurate with its scale and complexity. The Internal Audit team reports directly to the Audit Committee of the Board, ensuring independence and effective monitoring. No material weaknesses were observed during the year.

Human Resources

The total employee strength stood at 5 as of March 31, 2025. Emphasis was laid on staff upskilling, retention, and performance- linked incentives. The Company maintained a positive employee satisfaction index with low attrition levels.

Outlook

The NBFC sector is poised for sustained growth, driven by rural and semi-urban credit demand, digitization, and financial inclusion initiatives. The Company aims to:

• Deepen presence in under-penetrated markets.

• Explore co-lending and fintech partnerships.

• Maintain asset quality and enhance return ratios.

The management is confident of delivering stable and sustainable growth, aligned with its vision of inclusive financial empowerment. Cautionary Statement

Statements in this MD&A report describing the Companys objectives, projections, estimates, expectations, or predictions may be "forward-looking statements” within the meaning of applicable laws and regulations. Actual results may differ materially due to economic conditions, regulatory changes, and other factors.

Global Market Landscape

The global Non-Banking Financial Company (NBFC) sector continues to expand, driven by increasing demand for alternative financial services, especially in emerging markets. As of 2024, the global NBFC market was valued at approximately USD 218.98 trillion, with projections to reach USD 265.19 trillion by 2033, reflecting a compound annual growth rate (CAGR) of 2.15%

In India, the NBFC sectors Asset Under Management (AUM) is anticipated to grow at a rate of 13-15% in FY25, reaching over 50 lakh crore, despite challenges in accessing debt funding .

Key Trends Influencing the NBFC Sector

1. Digital Transformation and Fintech Integration

NBFCs are increasingly adopting digital platforms and collaborating with fintech companies to enhance customer experience, streamline operations, and expand their reach, particularly in underserved regions .

2. Focus on Micro, Small, and Medium Enterprises (MSMEs)

NBFCs are playing a pivotal role in providing financing to MSMEs, which are often underserved by traditional banks, thereby fostering economic growth and job creation .

3. Green and Sustainable Financing

With a global emphasis on sustainability, NBFCs are increasingly funding environmentally friendly projects, including renewable energy initiatives and electric vehicle financing, aligning with both regulatory requirements and market demand.

4. Technological Advancements

The adoption of Artificial Intelligence (AI), Machine Learning (ML), and blockchain technology is revolutionizing credit assessment, fraud detection, and operational efficiency within the NBFC sector .

Challenges Facing the NBFC Sector

• Rising Funding Costs: Increased capital requirements and higher interest rates are elevating borrowing costs for NBFCs, potentially impacting profitability

• Regulatory Compliance: Stricter regulations necessitate significant investments in compliance infrastructure and processes.

• Asset Quality Management: Maintaining asset quality amidst economic fluctuations and evolving credit landscapes remains a critical concern.

Strategic Outlook

To navigate these challenges and capitalize on growth opportunities, NBFCs are focusing on:

• Diversifying Funding Sources: Exploring international markets and alternative financing options to mitigate funding risks.

• Enhancing Digital Capabilities: Investing in technology to improve customer engagement, operational efficiency, and data analytics.

• Expanding into Underserved Markets: Targeting rural and semi-urban areas with tailored financial products to drive inclusion.

• Fostering Strategic Partnerships: Collaborating with fintech firms and other stakeholders to innovate and expand service offerings.

The NBFC sector is poised for continued growth, underpinned by technological advancements, strategic partnerships, and a focus on underserved markets. However, addressing challenges related to funding costs, regulatory compliance, and asset quality will be crucial for sustaining long-term profitability and stability.

Opportunities

According to the World Bank, Non-Banking Financial Institutions (NBFIs) serve as vital components of a resilient financial system, contributing to macroeconomic stability and long-term economic growth. Their ability to offer cost-effective financing to both individuals and businesses, diversify funding sources, and provide alternative investment avenues helps reduce systemic volatility while fostering competition through a broad range of financial products. This role has been well-demonstrated in mature financial markets. In India, Non-Banking Financial Companies (NBFCs) continue to be instrumental in expanding access to financial services, particularly among underserved and remote populations. They are increasingly establishing themselves as key players in the retail finance space. Looking ahead, NBFCs are expected to further solidify their position in retail lending and maintain a steady growth trajectory.

Threats

In FY 2025, NBFCs continue to grapple with mounting competition from banks and other financial institutions, primarily due to their access to low-cost funding, which allows them to offer credit at more competitive rates. Additionally, the Reserve Bank of Indias enhanced capital adequacy requirements for NBFCs have further constrained their ability to extend lower-cost financing, putting additional pressure on their margins and lending capabilities.

The challenges are compounded by the growing dominance of commercial players with a higher risk-absorption capacity, rising counterparty risks, and ongoing regulatory developments aimed at expanding the supervisory scope over NBFCs. While these measures aim to strengthen systemic stability, there is a growing concern that they may dilute the unique positioning of NBFCs? entities originally structured to serve niche segments and underbanked populations with customized, flexible financial solutions.

Key Investments and developments in Indias banking industry include:

Indias banking industry in 2025 is experiencing significant transformations driven by technological advancements, regulatory reforms, and strategic investments. Here are some key developments shaping the sector:

1. Strategic Investments and Stake Acquisitions

SMBCs Interest in Yes Bank: Japans Sumitomo Mitsui Banking Corporation (SMBC) is in advanced negotiations to acquire a stake in Yes Bank, potentially leading to an open offer for an additional 26% stake. This move signifies increased foreign interest in Indias banking sector. Reuters

2. Monetary Policy Adjustments

Interest Rate Cuts: The Reserve Bank of India (RBI) has reduced the key repo rate to 6% in April 2025, adopting an "accommodative" stance to support economic growth amidst declining inflation. Reuters

3. Digital Payment Infrastructure Enhancements

Merchant Discount Rate (MDR) Proposal: Indian authorities are considering implementing a Merchant Discount Rate of 0.2% to 0.3% on digital payments via the Unified Payments Interface (UPI). This initiative aims to bolster investments in payment infrastructure and sustain the growth of digital transactions. Reuters

4. Introduction of Residential Mortgage-Backed Securities (RMBS)

First RMBS Listing: India has launched its inaugural listing of residential mortgage-backed securities, with LIC Housing Finance raising ^10 billion through 20-year securities. This development is expected to attract long-term investors and deepen the capital markets. Reuters

5. Central Bank Digital Currency (CBDC) Initiatives

Digital Rupee Expansion: The RBI continues to pilot the Digital Rupee (^), with plans to introduce offline transaction capabilities. This initiative aims to enhance financial inclusion and reduce reliance on physical currency. Wikipedia

These developments underscore Indias commitment to modernizing its banking sector, fostering financial inclusion, and integrating advanced technologies to meet the evolving needs of its economy.

Reserve Bank of India (RBI) Policy Measures

The RBI, along with the government, continues to focus on bolstering MSME finance through various policy measures. Key initiatives include the expansion of credit guarantee schemes like MCGS-MSME, the growth of MUDRA Yojana, revised MSME classifications, and other support measures like no collateral for loans up to ^10 lakh and the development of new platforms like Udyam Assist.

Elaboration:

• Credit Guarantee Schemes:The MCGS-MSME scheme provides a 60% guarantee on equipment loans up to 100 crore, effective January 27, 2025. The Union Budget 2025 also increased the CGTMSE cover to ^10 crore, according to the PIB.

• MUDRA Yojana:This scheme has seen significant disbursement with over 52 crore loans worth 32.61 lakh crore sanctioned as of April 2025. A new Tarun Plus category, for loans up to 20 lakh, was introduced in October 2024, with women comprising 68% of the beneficiaries.

• MSME Classification:The classification for MSMEs was revised, with increased investment and turnover limits for Micro, Small, and Medium enterprises, effective April 1, 2025.

• Micro: Investment up to 2.5 crore, Turnover up to 10 crore.

• Small: Investment up to 25 crore, Turnover up to 100 crore.

• Medium: Investment up to 125 crore, Turnover up to 500 crore.

• Other Measures:Other measures include no collateral for MSE loans up to 10 lakh, the implementation of TReDS, external benchmark linking for MSME loans, and the development of new platforms like Udyam Assist.

Financial Services -NBFC Sector

NBFCs have become a key component of Indias financial sector, outpacing scheduled commercial banks (SCBs) in credit growth in recent years. With their deep regional knowledge, efficient collection systems, and customer-focused services, NBFCs have been instrumental in driving financial inclusion. Their low transaction costs, quick decision-making, and personalized offerings differentiate them from banks, positioning them well to bridge the financing gap in India.

Over the past decade, NBFCs have grown significantly, now representing over a quarter of the balance sheet size of banks. This growth has prompted the RBI to increase regulatory oversight of larger NBFCs, as outlined in its 2021 framework aimed at addressing potential systemic risks while fostering further development in the sector.

The COVID-19 pandemic tested the resilience of NBFCs, particularly due to the lack of relief on liabilities, unlike banks. However, those that maintained strong liquidity were able to navigate the crisis successfully. Despite previous challenges like demonetization, GST implementation, and the failure of a major NBFC, the sector has demonstrated its resilience. With stronger capital adequacy, improved margins, and lower NPAs, the NBFC sector is poised for growth in the post-pandemic period, with the RBIs revised framework further enhancing its resilience.

Human Resources:

The Company has a group of able and experienced employees. The Company believes that the quality of its employees is the key to its success in the long run. The Company continues to have cordial relations with its employees and provides personal development opportunities for all round exposure to them. The Directors wish to place on record their appreciation and acknowledgment of the efforts and dedication and contributions made by employees at all levels during the year under review.

Segment-wise performance:

The Company has done well in all segments as we can see from the financial statements above.

The Financial and Operational Performance

The financial statements for FY 2025 have been prepared in accordance with the provisions of the Companies Act, 2013 and the applicable Accounting Standards prescribed by the Institute of Chartered Accountants of India (ICAI). They reflect the Companys commitment to transparency, with estimates and judgments made on a prudent and reasonable basis to present a true and fair view of its financial position and performance

Internal control systems and their adequacy:

In FY 2025, the Company continued to reinforce its governance framework through the adoption of the Three Lines of Defence model, comprising: (i) management oversight and internal control mechanisms, (ii) robust financial controls, risk management practices, security protocols, and compliance monitoring, and (iii) an independent internal audit function serving as the third line of defence. The Companys Internal Management Assurance function, aligned with its size and operational complexity, plays a critical role in evaluating the adequacy and effectiveness of internal controls and ensuring strict adherence to established policies, procedures, and regulatory requirements.

To further enhance the scope and impact of internal audits, the Company has invested in domain experts, strengthening its ability to proactively identify and mitigate control risks. Internal controls and risk management practices are periodically validated through structured review mechanisms to ensure their continued relevance and effectiveness. The Internal Control over Financial Reporting (ICOFR) remains the foundation of the Companys risk and control environment. As mandated by the Companies Act, 2013, both the Board of Directors and the statutory auditors assess and report on the sufficiency and operational effectiveness of the Companys internal control systems.

Our strategy:

• Expansion of existing activities.

• Financial Management/Advisory Services.

• Brand recognition Retention of customer base with a holistic association approach.

• Constant strengthening of risk framework.

Compliance

In FY 2025, the Companys Compliance function continued to operate as an independent and integral part of the governance framework, ensuring that all business and operational activities align with applicable regulatory requirements and internal policies. The Compliance Department has remained central to the effective execution of compliance responsibilities, acting in accordance with directives from regulatory authorities, the Board of Directors, and the Companys established Compliance Policy.

Regular oversight is maintained through periodic reviews by the Audit Committee of the Board, which evaluates the effectiveness of the Compliance Department and monitors adherence to both regulatory mandates and internal standards. This structured approach supports a culture of accountability and reinforces the Companys commitment to ethical and responsible conduct across all functions.

Cautionary:

The Board of Directors have reviewed the Management Discussion and Analysis prepared by the Management, and the Independent Auditors have noted its contents. Statement in this report of the Companys objective, projections, estimates, exceptions, and predictions are forward lookings tatements subject to the applicable laws and regulations. The statements may be subjected to certain risks and uncertainties.

Disclaimer:

All the data used in the initial sections of this report has been taken from publicly available resources and discrepancies, if any, are incidental and unintentional.