TCFC Finance Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

1. Global Economic Overview

?€? Growth Trends & Forecasts:-

Global GDP growth is expected to slow significantly in 2025, with estimates ranging between 2.3% 3.3%, depending on the source. The World Bank forecasts a slowdown to 2.3%, citing intensified trade tensions and tariffs, down from 2.7% earlier projections Reuters. Similarly, the OECD expects growth at 2.9% in both 2025 and 2026 Financial TimesThe Times of India. The IMF projects a slightly higher pace of 3.3%, with inflation gradually declining to 4.2% in 2025IMF.

?€? Risks: Trade Tensions & Protectionism

Escalating trade barriers especially initiated by the U.S. are a key threat to global economic stability, impairing trade and investment flowsReutersOECD+1Financial Times. The UN DESA anticipates a steep global slowdown to 2.4% in 2025, particularly affecting trade-reliant economies United Nations. Financial markets remain jittery, especially in economies dependent on global trade S&P Global Reuters.

Inflation & Monetary Policy Outlook

Inflation is projected to moderate but remain above pre-pandemic levels in many regions. The IMF expects a global headline inflation rate of 4.2% in 2025, moderating to 3.5% in 2026 IMF. OECD forecasts G20 inflation moderating from 6.2% to 3.6% in 2025 and further to 3.2% in 2026 OECD. Policy support is anticipated through gradual rate cuts by central banks in advanced economies, though duration and extent remain dependent on evolving disinflation paths and market volatility OECDRSM USMorgan Stanley.

2. Implications for NBFCs: Risk & Opportunity

?€? External Headwinds

The global slowdown especially via sluggish trade and investment can lead to tighter liquidity conditions, higher funding costs, and increased caution among institutional investors. NBFCs should prepare for potential volatility in foreign borrowings and risk premiums.

?€? Interest Rate & Funding Dynamics

While global monetary easing may lower international borrowing costs, uneven easing (particularly in countries facing inflation risks) may restrict the full benefit for NBFCs. Vigilant asset-liability management is key.

?€? Strategic Opportunities

Sluggish global trade and elevated risk aversion may shift investor focus toward emerging markets like India, which continues to be viewed favorably evidenced by Fitch reaffirming India s BBB rating with a stable outlook and projected GDP growth of 6.5% in FY26 ReutersThe Economic Times.

NBFCs positioned to tap into inspired areas like MSME lending, affordable housing, green financing, and digital financial services may attract both domestic and foreign capital seeking high-growth alternatives.

3. Disclosure & Strategic Priorities Global Economic Sensitivities

Forecast scenarios: recognition that global growth may fall within 2.3% 3.3% for 2025, with significant downside risks due to trade disruptions.

Monitoring tools: continuous tracking of trade developments, global PMI indicators, and central bank policy shifts to forecast external risks.

Risk Management Framework

Funding diversification: hedging exposure to fluctuations in international financing markets.

Liquidity buffers: maintaining higher levels of short-term liquid assets to absorb potential cost or availability shocks.

Asset quality vigilance: stress-testing portfolios under slower economic growth and tighter credit conditions.

Strategic Positioning

Invest in emerging themes: scaling up segments like MSME loans, green financing, and low-cost housing which align with domestic growth thrust.

Digital transformation: technology-driven underwriting and risk assessment to improve efficiency and reduce costs.

ESG alignment: aligning financing strategies with sustainable and green initiatives but also ensuring adaptability to global shifts like trade policy changes.

4. Conclusion

The global economy in 2025 faces a noticeably softer growth trajectory and elevated uncertainty due to trade tensions and geopolitical risks. Against this backdrop, NBFCs must sharpen their risk frameworks, bolster liquidity, and remain strategically agile.

Notably, India s domestic resilience as reflected in strong sovereign ratings and projected GDP growth presents significant opportunities. NBFCs that align their strategies with local growth sectors, digital innovation, and global best practices in financial resilience will be well-positioned to navigate volatility and thrive.

Acknowledgement

The Board of Directors extends its sincere gratitude to all stakeholders, including shareholders, investors, financial institutions, regulators, and business associates, for their continued support and trust. We also express our appreciation to the Company s employees for their unwavering commitment, professionalism, and contribution to the Company s progress.

For and behalf of the Board of Directors

TCFC Finance Limited