Tokyo Finance Ltd Management Discussions

STRUCTURE AND DEVELOPMENTS, OPPORTUNIIES AND THREATS, PERFORMANCE, OUTLOOK, RISKS

AND CONCERNS:

NBFCs CRAR stood at 27.1 per cent in March 2025, continuing to remain well above the regulatory minimum requirement. The RoA ratio has further improved, supported by diversified asset growth, and the cost-to-income ratio maintained its declining trend due to enhanced operational efficiency and digital adoption throughout F.Y. 2024-25. Net interest margin (NIM) remained resilient, reflecting stable lending rates and prudent asset-liability management.

The interconnectedness between banks and NBFCs continued to deepen, with bank finance to NBFCs now representing 10.9% of total bank credit, up from 9.4% last year. The RBI maintains its caution regarding this growing interconnectedness and continues to encourage NBFCs to diversify funding sources and strengthen risk governance frameworks to address systemic risk concerns.

INDUSTRY STRUCTUREAND DEVELOPMENTS:

Indias economy retained its robust growth trajectory in FY 2024-25, with healthy real GDP rates despite ongoing global uncertainties. The NBFC sector displayed remarkable resilience, further accelerating sectoral credit growth, particularly in retail, MSME, and vehicle financing segments. NBFCs grew at a CAGR of 15% during the year, increasing market share to 24% of total institutional credit. Banks accounted for approximately 69% and AIFIs held the residual 7% of credit market share. Widespread digital transformation and regulatory reforms have enabled NBFCs to penetrate underserved markets and drive financial inclusion.

OPPORTUNITIES & THREATS:

The regulatory landscape for NBFCs in 2025 remains demanding, with ongoing enhancements in prudential norms, ESG mandates, cyber security protocols, and consumer protection requirements. Regulatory expectations in digital oversight and risk management require NBFCs to invest in advanced analytics, compliance automation, and robust risk monitoring frameworks.

Key opportunities lie in expanding last-mile financial access, digital lending platforms, and new partnerships in MSME and underserved rural segments. NBFCs able to leverage technology and sustain strong governance will likely capture growth. Risks include systemic exposure due to interconnectedness with banks and financial markets, rising NPAs in unsecured retail lending, and intensified scrutiny across compliance and deposit safety, all of which require ongoing adaptation and strategic oversight.

INDIANACCOUNTING STANDARDS (INDAS):

The Ministry of CorporateAffairs (MCA), based on its notification in the Official Gazette vide Noti- fication G.S.R. 111(E) and G.S.R. 365(E)dated February 16, 2015 and March 30, 2016 respectively, notified the Indian Accounting Standards (IndAS) applicable to certain class of companies. IndAS has replaced the Indian GAAP prescribed under section 133 of the CompaniesAct, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. These notifications are applicable to our company effectiveApril 1, 2019.

INTERNAL CONTROL SYSTEMSAND THEIRADEQUACY:

The Company has adequate Internal Control System commensurate with its size and nature of busi- ness. All transactions are properly authorized, recorded and reported to the management. The internal control systems are designed to ensure that the financial statements are prepared based on reliable information. The Internal Audit is continuously conducted by in house InternalAudit department of the Company and InternalAudit Reports are reviewed by theAudit Committee of the Board periodically.

SEGMENT WISE PERFORMANCE:

The Company is operating in a single segment. Hence, no separate segment wise information is given.

HUMAN RESOURCES DEVELOPMENTAND INDUSTRIAL RELATIONS:

The Company recognizes human resources as a key component for facilitating organizational growth and shareholder value creation. Various initiatives have been taken to strengthen human resources of the Company. Relation with the employees and workers were cordial. Your Company is dedicated to partnering with employees and strengthening its talent pool by providing them with growth and career enhancement opportunities.

CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis and Directors Report describing the Companys strengths, strategies, projections and estimates, are forward-looking statements and progressive within the meaning of applicable laws and regulations. Actual results may vary from those expressed or implied, depending upon economic conditions, Government Policies and other incidental factors. Read- ers are cautioned not to place undue reliance on the forward looking statements.

OUTLOOK

The NBFC sector is poised for steady growth in FY 2025–26, driven by strong credit demand, digital transformation, and regulatory support. The Company will focus on maintaining a robust capital base, prudent risk management, and leveraging technology for operational efficiency and business expansion.

RISKSAND CONCERNS

Key risks include credit and liquidity pressures, regulatory changes, and cyber threats. The Company mitigates these risks through strong governance, diversified funding, and advanced risk monitoring frameworks

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

The Company delivered a stable performance in FY 2024–25 with CRAR at 27.1%, improved RoA, resilient NIM, and a lower cost-to-income ratio. Portfolio growth in retail and MSME segments was achieved while maintaining a conservative credit profile.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT

The Company invested in employee development and digital upskilling initiatives. Industrial relations remained cordial. As of March 31, 2025, the Company employed 6 employees.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Particulars	2024-25	2023-24	Variance (%)	Explanation
Debt-Equity Ratio	0.03	0.02	+32.05 %	Due to increase in liabilities

DISCLOSURE OFACCOUNTING TREATMENT:

The financial statements of the Company have been prepared in accordance with the applicable Indian Accounting Standards (Ind AS) notified by the Ministry of Corporate Affairs, pursuant to the provisions of Section 133 of the CompaniesAct, 2013 and the Companies (IndianAccounting Standards) Rules, 2015, as amended from time to time. There has been no treatment different from that prescribed in the Accounting Standards in the preparation of the financial statements