Tourism Finance Corporation of India Ltd Management Discussions

1. Global and Indian Economy

As per the forecasts of International Monetary Fund (IMF) the world economy is projected to grow at 2.8 percent during CY 2025 as against 3.3 percent in CY 2024 due to adverse trade policy shifts, geopolitical tensions, persistent inflation, climate-related natural disaster and persistent policy uncertainty that are dampening investment and cross-border commerce. It is expected to recover to 3.0 percent in CY 2026. The advanced economies are expected to grow at 1.4 percent in 2025 and 1.5 percent in 2026 while emerging market and developing economies expected to grow at 3.7 percent in CY 2025 and 3.9 percent in CY 2026. The conspicuous bright spot amidst this global moderation is the Indian economy, which continues to defy prevailing trends. In contrast, the Indian economy is firmly positioned to maintain its status as the worlds fastest-growing major economy with GDP growth of 6.2 percent in 2025 and 6.3 percent in 2026.

Global inflation is forecast to decline steadily from 4.3 percent in 2025 to 3.6 percent in 2026, while advanced economies are still on course to achieve their respective inflation targets sooner than emerging market and developing economies, the pace of disinflation across these economies has proven to be slower than the initial, more optimistic, projections.

is the increasing openness of the economy which has helped to attract a growing number of international business conglomerates to the country and has contributed to the growth of many sectors including manufacturing, services, defence, space and technology. The business environment in India is also being shaped by several social and demographic trends, for example the country has a young and growing population with around half of the population under the age of 25. This youthful demographic is driving demand for a wide range of products and services and is also contributing to the growth of the countrys digital economy. Aided by easing inflation and higher farm income, rural income levels have shown an uptick thereby contributing to the Indias growth story. Additionally, good monsoon rains are anticipated to further boost rural income- levels and consumption. Ongoing efforts in areas like skilling labour, education, and financial sector policies are also enhancing productivity and potential growth opportunities. The Indian economy exhibits strong fundamentals and a clear growth path, solidifying its position as a global economic powerhouse despite facing external challenges. The other major pointers of Indian economy in 2024-25 were:

• Foreign Exchange Reserve reaching to the USD 654 billion covering 9 months of imports.

Source: IMF, World Economic Outlook, April25 India continues to be a beacon of economic growth amidst a somewhat uncertain global landscape. The country has positioned itself to sustain a robust growth trajectory. This resilience is largely attributed to timely policy and regulatory support from the government and a steady growth in private sector activity.

Indian economy has undergone significant changes in recent years and has reached to USD ~4.3 trillion in FY25 with agriculture, industries, services having 17.7%, 27.6%, 54.7% share respectively in GDP. Currently, Indian economy is the 4th largest economy in the world after United States of America, China and Germany. Another key trend in the Indian business environment

• Goods and Services Tax (GST) collection in 2024-25 increased to Rs.22 Lakh crore (an increase of 9.4 %).

• Public sector spending on capital investment estimated at Rs.11.40 Lakh crore.

• Increase in merchandise, services & agriculture exports to USD820 billion in FY25, increase of 6% over last fiscal.

• Reduction in fiscal deficit to 4.8% of GDP.

• Current account deficit remained in check at 1.2% of GDP.

• Despite volatility in stock markets, there was growth in both NIFTY & SENSEX.

1.1 Outlook for Indian Economy

The Indian economy is poised for continued robust growth in the fiscal year 2025-26, solidifying its position as the fastest-growing economy globally. The Union Budget 2025-26, presented with the theme "Sabka Vikas" (inclusive development), outlines key measures aimed at accelerating growth, fostering inclusive development, spurring agricultural growth & building rural prosperity, invigorating private sector investments, supporting MSME & furthering Make in India, investing in economy, innovation & people, promoting export and enhancing the spending power of Indias rising middle class. The budget is focused on growth and job creation backed by stable macro-economic environment including the following measures.

• Agriculture & Rural Support: Enhance credit through Kisan credit Card, Cotton productive mission, high yielding seeds, self-sufficiency in pulses production etc.

• Infrastructure: Support to States for infrastructure development, Jal Jeevan mission to all by 2028, Urban Challenge Fund of Rs.1 Lakh crore, irrigation & flood migration projects worth Rs.11,500 crore, power sector reforms, etc.

• Exports: Support to exports by easy export finance, setting up of Bharat Trade Net- digital Platform for international trade, warehousing facility for air cargo, etc.

• Tourism: Ease of travel & connectivity, streamlined e-visa facilities, 50 tourism destination development in partnership with States which will qualify under infrastructure, Mudra loans for homestays, intensive skill-development programmes in tourism services for youth, etc.

• Reforms: Financial sector reforms, direct tax reforms & proposal to introduce new Income-Tax bill, rationalisation of custom tariff, regulatory reforms to unleash productivity & employment exemption to Make in India in electronics, improved access to life-saving medicines, etc.

Indian economy is expected to reach to USD 6 trillion by FY31. The average annual GDP growth rate is expected to be around 6% during the period FY26 to FY31 and India is expected to be the third largest economy and an upper middle- income country in the next three years. By FY31, the sectoral contributions to Indias GDP are anticipated to shift, with the share of agriculture at approximately 13%, industries at around 31%, and services at around 56%. This reflects

a continued structural transformation towards a more industrialized and service-oriented economy. The rising per capita income, projected to reach around USD 4,500 by FY31, is expected to significantly boost domestic consumption and discretionary spending. The increased consumer demands will be a key driver of economic growth. Capital spending, both government & private, will play a dominant role in the countrys growth path with productivity improvement. Private sector would require debt of Rs.55-60 Lakh crore to fund capex in the next 3-4 years.

1.2 Government Initiatives

The Government of India is implementing various initiatives to boost economic growth, including promoting manufacturing through schemes like Make in India and Production-Linked Incentive (PLI) schemes, reducing compliance burdens, and improving infrastructure through PM Gati- Shakti, National Infrastructure Pipeline and comprehensive tax reforms. "Make in India" initiative has been a cornerstone in transforming India into a global manufacturing hub. With a strong focus on enhancing industrial capabilities, fostering innovation, and creating world-class infrastructure, the initiative aims to position India as a key player in the global economy. These efforts aim to attract both domestic and foreign investment, stimulate job creation and enhance Indias global competitiveness.

1.3 RBI Monetary Policy

In its latest Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) delivered a significant and largely unexpected "jumbo" rate cut. The MPC reduced the repo rate by 50 basis points (bps) to 5.50%. This marks the third consecutive rate cut this year, bringing the cumulative reduction to 100 bps since February 2025. Beyond the repo rate cut, the RBI also announced a substantial 100 bps reduction in the Cash Reserve Ratio (CRR) to 3%, to be implemented in four staggered tranches by November 2025. This move is expected to inject Rs. 2.5 Lakh crore into the banking system, aiming to ease liquidity and facilitate policy transmission. The policy stance has also shifted from "accommodative" to "neutral". This indicates that while the RBI has front-loaded its easing cycle to support growth amidst benign inflation, it will now adopt a data-dependent approach for future policy actions. The inflation forecast for FY26 has been revised downwards to 3.7%, while the GDP growth projection for FY26 has been retained at 6.5%. The decisions are geared towards boosting economic momentum and ensuring ample liquidity in the system.

2. Tourism and Hospitality Sector

The United Nations World Tourism Organization (UNWTO) projects a continued recovery and growth for the tourism and hospitality sector, with international tourist arrivals expected to grow by 3-5% in 2025 compared to 2024. This positive outlook is driven by the continued recovery of Asia and the Pacific and solid growth in most other regions. International tourism virtually recovered (99%) pre-pandemic levels in 2024, with most destinations exceeding 2019 numbers. An estimated 1.4 billion international tourists (overnight visitors) were recorded around the world in 2024, an increase of 11% over 2023, or 140 million more. The Middle-East remained the strongest-performing region when compared to 2019, with international arrivals climbing 32% above prepandemic levels in 2024, though 1% over to 2023. Europe welcomed 1% more arrivals than in 2019 and 5% over 2023, while Africa saw a 7% increase in arrivals compared to 2019 and 12% more than in 2023. The America recovered 97% and Asia-Pacific 87% of its pre-pandemic arrivals. Total export revenues from tourism (including passenger transport) were estimated at a record USD

1.9 trillion in 2024, about 3% higher than before the pandemic and 4% more than in 2019 (real terms). About 64% of UN Tourism Panel of Experts indicate better or much better prospects for 2025 compared to 2024. Economic and geopolitical challenges continue to pose significant risks to confidence levels.

The World Travel and Tourism Council (WTTC) projects a positive outlook for Indias travel and tourism sector in 2025. The sector is expected to continue growing, with the contribution to the Indian economy projected to reach the global average of 10%. Specific projections include a 7% growth over the next 10 years and a

significant increase in international visitor spending. Indian Governments vision is to become a USD 3 trillion tourism economy by 2047 and is focussing to enhance countrys tourism, cultural, economic and social richness by strategic tourism infrastructure development, destination development, manpower development and fostering local entrepreneurship, complemented by robust global branding and marketing efforts Travel & tourism industry in India contributed around USD231 billion to the countrys GDP in FY25. During FY25, Foreign Tourist Arrivals were ~9.65 million with top 5 source countries being USA (18.14%), Bangladesh (17.57%), UK (10.28%), Australia (5.20%) & Canada (4.75%) and Domestic Tourist Visits were 2650 million. The Indian national departures were ~30.23 million. 157 Airports in the country handled total airline passenger traffic of 220 million (Domestic: 161 million & International: 59 million). The Indian hospitality sector is experiencing strong growth, the major demand generators for hotels were domestic corporate & leisure segment; big events such as IPL & other sports events; concerts like Coldplay, Ed Sheeran, Dua Lipa, Diljit Dosanjh; big fat Indian weddings and MICE; religious tourism (Varanasi, Ujjain, Tirupati, Vaishno Devi and particularly Ayodhya which 16 crore pilgrims had visited in 2024) etc.

The branded hotels achieved average occupancy of 66% and ARR of Rs.8,100/- in FY25 as against average occupancy of 68% and ARR of Rs.7,500/- in FY24. The hospitality sector average EBIDTA margin has improved in the range of 35%-40%. India branded hotel supply crossed the mark of 2 Lakh rooms with addition of ~14.4k rooms in CY24. Of the available inventory about 44% is in midscale & economy segment and balance 56% in luxury & upscale segment. During FY25, 486 hotel brand signings happened with an estimated 47,430 rooms. The segment mix is evolving with more than 50% of new supply concentrated in the Upper Midscale and Midscale Economy categories. This shift reflects the growing demand for affordable yet high-quality accommodations, particularly in Tier 2 and Tier 3 cities, where infrastructure improvements are driving business and leisure travel. Indias position as a premier MICE destination is also on rise with world standard venues in Tier-I cities. Mumbai, Delhi, Chennai & Kolkata were the top performing hospitality markets in terms of occupancy and Udaipur, Mumbai & Goa were top performing market in terms of ARR.

In the Budget 2025-26, Rs.2541 crore has been allocated to the tourism sector to enhance infrastructure, skill development, and travel facilitation. A major initiative includes developing 50 top tourist destinations in partnership with states through a challenge mode, ensuring world-class facilities and connectivity. Recognizing the deep cultural and spiritual significance of religious tourism, the government will prioritize the development of sites associated with pilgrimage and heritage and promoting diverse tourism segments, including spiritual, medical, and heritage tourism. Additionally, the Gyan Bharatam Mission aims to preserve and digitize Indias rich manuscript heritage, ensuring knowledge accessibility for future generations. The government also committed towards its Swadesh Darshan 2.0 scheme to develop sustainable tourist spots with a tourist and destination-centric approach. The PRASHAD (Pilgrimage Rejuvenation and Spiritual Heritage Augmentation Drive) Scheme is aimed at developing tourist facilities across India at pilgrimage and heritage sites for holistic development of the selected pilgrimage destinations.

2.1 Hospitality Sector - Outlook

Tourism Sector in India, which plays a significant role in countrys economy, contributing to GDP, job creation and FEEs, is witnessing a strong recovery post covid and growth trajectory is expected to remain strong. Contribution from tourism to Indias GDP is expected to reach 7-8% by FY2026 up from current level of 6.5% and is expected to grow at ~10% annually going forward. The key growth drivers for hospitality is rising number of middle-class, young population looking for experiences and high-income population. The hotel demand is expected to exceed supply resulting in growth in both occupancy & ARR. Major capex will be witnessed in the hospitality sector, particularly in emerging cities & tourist/ religious locations. Indian Government vision is to promote sustainable, responsible, and holistic growth of tourism in the country. The growth in tourism & travel industry has to be led by Private

Sector with enabling & facilitating role undertaken by the Government. Strategic government initiatives, such as the Swadesh Darshan scheme, UDAN scheme, Dekho Apna Desh, PRASAD Scheme, E-Visas and granting of infrastructure status to hotels in tourism destinations, are expected to drive sectoral growth. These initiatives will encourage greater investments, provide better financing options, and improve tourism infrastructure. With favourable demographics, increasing disposable incomes and expanding connectivity, the Indian hospitality sector is well- positioned for sustained growth. Indian tourism vision aims to achieve tourism GDP of Rs.33 Lakh crore (USD390 billion), Foreign Tourist Arrivals of 15 million, Domestic Tourist Visits of 4 billion and Employment Capability of 88 million by FY2031. Eco-tourism, nature-tourism, religious tourism, heritage tourism, beach-tourism, adventure tourism, wellness/health/medical tourism, etc. are likely to remain key hospitality segments going forward.

The market-size of hotels in the country is about Rs.2.6 Lakh crore (USD 30 billion) which is expected to reach Rs.3.5 Lakh crore (USD 40 billion) in coming 2 to 3 years. Considering that India is aiming to become a large-developed economy, vast scope exists for the growth in hospitality sector. The demand growth is likely to outpace the supply growth in hospitality sector. While hotel supply growth is estimated at CAGR of 7%, the hotel demand growth is estimated at CAGR of ~10% for the period FY26-FY31. The demand generators for the hospitality sectors would be domestic commercial & leisure, foreign commercial & leisure, MICE and social segments. As such, vast potential exists for development of hotels in the country & capex in this sector is expected to remain robust which would translate into credit opportunity for TFCI.

3. Social Infrastructure outlook

Besides financing in tourism/hospitality sector, your company is actively providing financial assistance by way of term loans to social infrastructure projects in Renewable energy, Healthcare, and Education, which are growing steadily and offers ample financing opportunities. Indias infrastructure sector as a key driver of economic growth emphasizes the need for continued investment and focusing on integrated multi-modal transport and modernization of existing assets to improve efficiency and connectivity. Indias Infrastructure Sector market size was estimated at Rs.17.7 Lakh crore (USD 204 billion) in 2024 and is expected to reach Rs.27.9 Lakh crore (USD 322 billion) by 2029, growing at a CAGR of 9.6%. India is enhancing its infrastructure and insight on our focus social infra sub-segments are as under:

3.1 Renewable Energy

The Government of India has increased focus on clean energy with about 180GW capacity addition by 2029, out of which 50% shall be from renewable energy sources. Indias rooftop solar energy capacity is projected to surge, rising from 17 GW to an estimated 25-30 GW between FY25 and FY27 (1GW requires ~ Rs.7000 crore of capex). Captive solar investments in rooftop solar have payback periods of 3-5 years, falling module prices, and innovative financing models are catalysing adoption in manufacturing and services sectors. Further, in households, PM Surya Ghar Yojna is driving the residential roof-top solar market.

3.2 Healthcare

The Indian healthcare sector continues to demonstrate robust growth, fuelled by both the private sector and ongoing government initiatives. The Indian healthcare sector is witnessing unprecedented growth and is likely to have reached to Rs.55.5 Lakh crore (USD 638 billion) by FY2025. Government has allocated Rs.1 Lakh crore (USD 11.50 billion) to the healthcare sector in the Union Budget 2025-26 for the development, maintenance, and enhancement of the countrys healthcare system. The Indian healthcare sector is one of Indias largest employers with ~7.5 million people, with progress in telemedicine, virtual assistants, and data analytics which is expected to create around 3 million new tech jobs. However, this represents only the beginning, as the sector is anticipated to experience substantial growth, with over 6.3 million additional jobs expected by CY30. Indian medical tourism market was valued at Rs.66 thousand crore (USD 7.69 billion) in 2024 and is expected to reach Rs.1.24 Lakh crore (USD 14.31 billion) by 2029, indicating substantial economic benefits for the country. This reflects strong capex demand from healthcare segment.

3.3 Education

Education has always been a key priority for the Government. To make India a global education hub, Government has made substantial allocation of Rs.1.28 trillion for the education sector viz. schools, colleges and higher education, with emphasis on digital learning, AI integration, and skill development. The Economic Survey 2024-25 highlights Indias education sectors growth, with a focus on expanding higher education institutions and achieving a 50% Gross Enrolment Ratio (GER) by 2035, while also emphasizing foundational learning and digital education. The Union Budget 2025-26 introduces innovative initiatives focused on expanding medical seats, enhancing skilling infrastructure and growing IITs, IIMs, etc. to equip youth with essential skills for the future.

4. Real Estate Sector Outlook

This sector contributes about 7.3% of GDP and is the second largest employment generator in India. The residential real-estate market witnessed sales of 4.60 Lakh units in FY24. The pan-India inventory at 14 months overhang was the lowest in last 10 years (PY:15 months inventory). This reduction is largely on account of strong buyer demand and curtailed new launches, contributing to overall market stability. Real-Estate is expected to contribute 13% of the countrys GDP by FY26, from an existing share of 7.3%. The growth shall be driven by both demand & supply in the industry and favourable home loan interest rates. Indias Real-estate sector is expected to expand and reach USD 1 trillion by FY31.

5. Manufacturing/Industrial, Service Sectors Outlook

5.1 Manufacturing/Industrial

Propelled by growth in priority sectors and driven by favourable megatrends, Indias manufacturing sector has opened itself into new geographies and segments and has become one of the most attractive destinations for investment. Initiatives like Make in India, Digital India and Start-up India have given the much-needed thrust to the Electronics System Design and Manufacturing (ESDM) sector in India. Manufacturing subsegment of Industry currently contributes ~18% of the GDP and employs ~21% of the workforce. The manufacturing sector of India has the potential to reach USD 1 trillion by 2025-26. The share of manufacturing is expected to increase to 20%-22% of GDP by 2031. The growth rate of manufacturing is expected to increase in the range of 8.5%-9% for period (FY26 - FY31) from current 5%.

India is planning to offer incentives of up to Rs.18,000 crore (USD 2.2 billion) to spur local manufacturing in six new sectors including chemicals, shipping containers and inputs for vaccines. Indias e-commerce exports are projected to grow from USD 1 billion to USD 400 billion annually by 2030, aiding in achieving USD 2 trillion in total exports. FDI in Indias manufacturing sector has reached USD 165.1 billion, a 69% increase over the past decade, driven by production-linked incentive (PLI) schemes. In the last five years, total FDI inflows amounted to USD 383.5 billion. The key drivers for growth in manufacturing are:

• FDI in Manufacturing has increased significantly

• PLI Scheme (~^2.4 Lakh crore) boosting competitiveness through investments in logistics, roads, and digital infrastructure.

• Infrastructure and digital transformation is boosting manufacturing competitiveness.

• Supply chain diversification beyond China continues to gain traction.

• Expected Free Trade agreement with EU, UK, Canada, Australia & New Zealand. Building on the competitive advantage of a skilled workforce and lower cost of labour, the manufacturing sector is also witnessing an increased inflow of capex and heightened M&A activity, leading to a surge in manufacturing output and resultant increased contribution to exports. Major focus is on technology driven sectors/products - Semiconductors, Electronics, solar module manufacturing, Electric Vehicle and batteries, besides other industries.

5.2 Service Sector

Indias services sector has been the steadiest contributor to the Gross Value Added (GVA) in the economy. Its contribution to the total GVA at current prices has increased from 50.6% in FY14 to about 55% in FY25. The growth in the service sector, as measured by YoY change in the real GVA by services, has been above 6% in each year in the last decade, except for the Covid-19 pandemic that affected FY21. The average services growth rate before the pre-pandemic year was 8%. The average services growth in the post-pandemic Year, i.e. FY23 to FY25 has risen to 8.3%. The service sector also provides employment to approximately 30% of the workforce. Services also contribute indirectly to the GDP. Growth in the services sector is expected to remain robust at 7.2 per cent, driven by healthy activity in financial, real estate, professional services, public administration, defence, and other services. Indias service sector continues to attract strong foreign investments, according to the Department for Promotion of Industry and Internal Trade (DPIIT), FDI equity inflows reached Rs.3.5 Lakh crore (USD40.67 billion) in FY2024-25 (April- December), with the services sector accounting for Rs.0.63 Lakh crore (USD7.22 billion).

6. NBFC including MFI, HFC and ARC Sector Outlook

Over 9,400 NBFCs are registered with the RBI including retail, MSME, infra and wholesale having combined AUM of around Rs.51 Lakh crore and average growth in AUM varying from 12-15%. HFCs have aggregate AUM of around Rs.7 Lakh crore and is expected to grow 12-14%. The sectors future appears promising and incremental fresh funding requirement is estimated at Rs.5.6-6.0 Lakh crore in FY26.

The stressed assets resolution through Asset Reconstruction Companies (ARCs) has evolved over the years in tandem with changing business landscape and regulations. India has 28 ARCs registered with RBI and most of these have registered a healthy growth and profit

over the last few years. SEBI has allowed ARCs to avail loan against Security Receipts (SRs). As such, potential exists for financing profitable ARCs for quality stressed asset acquisition & servicing out of receivables through management fee, recovery, incentive & redemption of Security Receipts (SRs).

7. Key Challenges before NBFCs

Heres a look at the key challenges NBFCs may have to navigate:

• Geopolitical tensions, trade policy shift, persistent inflation and capital outflow by foreign investors may slow down the growth rate and affect financial services sector.

• The Indian finance sector operates within a dynamic regulatory environment characterized by evolving policies and regulatory changes. Uncertainties surrounding regulations, tax regimes, and compliance requirements pose challenges for businesses, hindering long-term planning and investment decisions. Achieving regulatory clarity and fostering a stable policy framework are imperative to foster investor confidence and sustain growth in the finance sector.

• High levels of NPAs weaken lending institutions balance sheets, constrain lending capacity and pose systemic risks to the financial sector. Resolving this challenge by lending institutions demands robust mechanisms for asset quality recognition, effective loan recovery framework, enhanced corporate governance and risk management practices.

8. Performance

Your Company has been having satisfactory operational performance and financial indicators despite challenging market conditions in the past few years as detailed in para 3 of the Directors Report.

8.1 Events occurring after Balance Sheet date

No Significant events occurred between the end of the financial year and date of the Boards report as detailed in the Directors Report. However your company has recovered significant amount from NPA accounts and redemption of Security Receipts during this intervening period.

8.2 Key financial ratios

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector- specific financial ratios. The Company has identified the following ratios as key financial ratios:

(Amount in crore)

Particulars	FY25	FY24
Total Income	260.06	242.03
Net Interest Income	106.69	94.96
Other Operating Income	-	4.50
Profit after Tax (PAT)	103.81	91.11
Tangible Networth	1207.28	1,074.85
Total Borrowings	866.09	983.04
Total AUM & Investments	1952.57	2050.10
Net Interest Margin (%)	5.07	4.58
Interest Coverage Ratio	2.29 times	2.15 times
Debt Equity Ratio	0.72:1	0.91:1
RoAA (%)	4.93	4.39
RoAE(%)	9.10	8.78
EPS(Rs.)	11.21	10.08
Book value per share (Rs.)	130.38	118.94
Capital Adequacy Ratio (%)	69.70	59.01

Your Companys PAT was Rs.103.81 crore for FY 2024-25 as against PAT of Rs.91.11 crore in FY 2023-24. The tangible networth of your Company increased to Rs.1207.28 crore as on 31.3.2025 compared to Rs.1074.85 crore in the previous year.

9. Companys Outlook

Considering the business environment and current domestic & global cues, the Board of Directors has approved a Business Plan for your company to ensure growth with prudent resource utilisation. Your company would focus on exploring credit opportunities across the hospitality/tourism sector, other resilient performing sectors viz. manufacturing, renewable energy (solar/ wind), social-infra, real-estate with focus on residential affordable/middle-income housing, and for onward lending to NBFC, HFC & ARC sectors. Your Company will also undertake retail lending through FinTech platforms, co-lending with Banks & established NBFCs in secured MSE & LAP products and term loans against security of category-1 listed shares. Your Company will also explore supply chain financing through digital platform(s). Given TFCIs expertise in the hospitality/tourism segment, lending to hospitality would continue to remain a thrust area in FY26, with emphasis on financing green-field projects, last-mile funding for under-implementation projects, brownfield projects, takeover/refinancing projects, acquisition finance, corporate financing, structured finance, and special situation financing. Besides, TFCI will also undertake fee-based business from segments like tourism advisory, corporate advisory, loan syndication, etc.

9.1 Core Competencies

• Deep Industry Expertise: We possess specialized knowledge and extensive experience in financing Indias tourism and hospitality industry, allowing us to truly understand the sectors unique needs and challenges.

• Broad Sectoral Reach: Beyond tourism, we have a proven track record of providing financial assistance to diverse sectors, including social and urban infrastructure (education, healthcare, affordable housing), real estate, manufacturing, and other resilient industries. We also offer onward lending to NBFCs, HFCs, and MFIs.

• Robust Network & Partnerships: TFCI has cultivated a vast network and strong partnerships across the tourism and other sectors. These relationships give us enhanced access to crucial resources, market intelligence, and collaborative opportunities.

• Comprehensive Financial Solutions: We offer a wide array of financial products and services, including project loans, term loans, corporate loans, working capital loans, acquisition financing, refinancing, takeover financing, and special situation financing.

9.2 Opportunities

• Growing Tourism Market: Indias tourism industry continues its robust growth, fuelled by increasing domestic and international travel. This expansion offers a prime opportunity for TFCI to broaden its customer base and offer a wider array of financial services to meet the escalating demand.

• Infrastructure Development & Real Estate Development: The Indian government remains committed to significant infrastructure development, encompassing highways, expressways, rail networks, airports, ports, power, waterworks, schools, colleges, hospitals, logistics, and warehouses. TFCI is well-positioned to capitalize on this by providing crucial financing for these projects, thereby contributing to Indias overall economic growth. Real-Estate is expected to contribute 13% of the countrys GDP by FY26 from an existing share of 7.3%. The growth shall be driven by both demand & supply in the industry and favourable home loan interest rates.

• Manufacturing: The manufacturing and 10. services sectors are undergoing a rapid digital transformation, creating new avenues for innovative financial solutions.

TFCI can explore these advancements to reach a wider lending customer base within these evolving sectors.

• NBFC/HFC/ARC Sector Growth: The NonBanking Financial Company (NBFC) sector is projected to maintain a strong annual growth rate of approximately 12% - 15% in the medium term. This presents a significant opportunity for TFCI to expand its lending and co-lending activities within this dynamic sector. The overall target return of ARCs is usually between 18% - 24% and having limited access to bank credit, provides lending opportunity to TFCI.

Risks and concerns

The Companys risk management philosophy and policy embody its commitment to understanding, measuring, and effectively managing risks while striving for sustained growth of a healthy asset portfolio. To achieve this, the company adopts a leadership approach in products and segments that it thoroughly understands. In areas with higher risk, an innovative approach is taken, which involves limited exposure and optimizing returns. A robust credit risk framework is in place, enabling the company to scientifically assess the credit risk rating of clients. This framework includes the mapping of internal rating grades to external rating agencies grades, providing a comprehensive view of credit risk. The output of rating model plays a crucial role in the companys decision-making process. Furthermore, the company maintains regular monitoring of portfolio distribution across low-risk, medium-risk, and high-risk categories. This monitoring helps ensure a well-balanced and diversified portfolio, enhancing risk management capabilities. Your Company has been managing the following risks effectively:

Type of Risk	Description	Mitigation
Credit Risk	Credit risk arises when a borrower or counterparty is unable to fulfill its contractual obligations. This risk extends beyond loans and encompasses various on and off-balance sheet exposures, including guarantees, acceptances, and investments in securities. In the context of project lending, inherent risks are present, particularly in developing economies where efforts toward long-term macroeconomic stability are still ongoing. Projects under implementation are susceptible to potential delays and cost overruns, often influenced by factors beyond the borrowers control.	Your Company has established a Credit Policy that has been approved by the Board of Directors. This policy is developed after taking into account inputs from Senior Management. It outlines a comprehensive set of credit procedures and guidelines, aimed at facilitating effective credit risk management and maintaining a robust portfolio. The credit policy is reviewed annually and amended periodically to ensure compliance with guidelines of regulatory bodies.
		Your Company is actively engaged in the identification of risks and factors by conducting regular reviews and enhancing appraisal techniques. This includes conducting sensitivity analysis and evaluating the projects resilience to withstand potential changes. The Company also considers the expertise and experience of borrowers in dealing with adverse situations. Credit appraisal remains a top priority for your Company, and TFCI place significant emphasis on intensive monitoring and supervision of projects on an ongoing basis.
Operational Risk	The risk of loss arises from insufficient or ineffective internal processes, personnel, and systems, as well as external events.	Operational risk management (ORM) is the process of proactively identifying, assessing, mitigating, and monitoring risks that disrupt/affect its business operations. These risks can be internal, such as people, processes, and systems, or external, like natural disasters or regulations. The primary objective of ORM is to protect value creation and shareholder/stakeholder confidence by managing operational risks arising from business activities while seizing opportunities that they create. TFCI has put in place a sound Operational Risk Management framework in form of inbuilt strong internal controls measures, systems and procedures across its business operations in commensurate with its complexity & nature to minimize operational disruptions and to ensure business continuity & operational resilience.

 

Type of Risk	Description	Mitigation
		This includes adoption of well-defined delegation of power, segregation of duties with dual check mechanism for authorisation of each transaction, staff regulation & their accountability, contingency planning, ensuring availability of insurance coverage, data storage & its retrieval arrangements i.e making system operational by backup data in real time basis while maintaining data integrity in case of some exigencies. The Companys controls over its business operations are managed effectively by implementing well-defined policies & standard operating procedures The obligations of employees to conduct/perform the duties in compliance of Companys policies and as per standard operating procedures are well defined. The adequate supervision & reviews are undertaken on regular basis to ensure that the internal control systems are adequate to protect the Company against any business disruptions & losses. Recently Reserve Bank of India came out with guidance note on Operational Risk Management & Operational Resilience to further improve & strengthen the Operational Risk Management Framework and to enhance operational resilience of its regulated entities. TFCI is in process to implement guidance note of RBI on Operational Risks to further strengthen its ORM Framework.
Interest Rate Risk	Interest-rate risks arise out of mismatches between interest- rate-sensitive assets and liabilities.	To manage such risks, your Company adopts a strategy of aligning lending interest rates with its average cost of borrowings. This approach helps in maintaining a balanced and sustainable interest rate structure. Additionally, your Company diligently monitors the maturity pattern of its assets and liabilities. This proactive monitoring ensures a prudent management of cash flows and minimizes any potential maturity mismatch risks. By employing these measures, your Company strives to effectively manage and mitigate its interest rate risks.
Liquidity Risk	Liquidity risk is the inability of a financial institute to meet its obligations as they become due, without adversely affecting the financial condition	Your Company has implemented a robust Integrated Risk Management Policy. This policy encompasses various risk management measures aimed at maintaining a healthy liquidity position. These measures include conducting short-term liquidity forecasts to identify and address any potential gaps promptly. Immediate actions are taken to correct such gaps and ensure sufficient liquidity in the short term. Furthermore, your Company emphasizes the diversification of funding sources to enhance flexibility in meeting the funding requirements. This diversification allows us to adapt to changing market conditions and mitigate liquidity risks. Additionally, maintaining strong capital adequacy is a key aspect of the risk management approach, providing a solid foundation to manage unexpected liquidity needs effectively. Through the diligent implementation of these measures, your Company aims to proactively manage liquidity risk and maintain a stable financial position.
Compliance & Regulatory Risk	The risk of legal or regulatory sanctions, significant financial loss, or damage to reputation arises when a company fails to comply with laws, regulations, rules, self-regulatory organization standards, and applicable codes of conduct.	To mitigate compliance and regulatory risk, your Company has established a robust framework that is closely monitored by the senior management team. This framework incorporates various measures to ensure adherence to applicable laws, regulations, and standards. Your Company emphasizes coordination and clear communication among departments, particularly when there are inter-dependencies. This collaborative approach ensures that all departments are aligned in meeting their compliance obligations and effectively managing regulatory risks.

11. Discussion on financial performance/ Internal control systems and their adequacy

The Financial and other operational performance of your Company has been discussed in detail in the Directors Report.

12. Material Developments in human resources/industrial relations front, including number of people employed

One of the most important and critical assets and foundation of the operations is human capital. Your Company strives to create a conducive environment for growth and development of the employees. The Financial Services sector heavily relies on the expertise and skills of its employees, making their role crucial in delivering high- quality services. Your Companys dedication to nurture and retain top talent, regular sponsorship of employees for training programs organized by professional institutions has been a priority. These programs aim to enhance skills and knowledge in various functional areas, ensuring that employees are equipped to excel in their roles. To ensure effective and timely client service, as well as consistent support to assisted units, the Company

maintains offices in Delhi and Mumbai. These strategic locations facilitate efficient communication and followup with clients and units in these regions. As of March 31, 2025, the Company had a workforce of 40 employees. Their expertise and commitment contribute significantly to the Companys success.

13. Cautionary Statement

This document contains statements about expected future events, financial and operating results of the Company, which are forward looking. By its nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that the assumptions, predictions, and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as several factors could cause assumptions, actual future results, and events to differ materially from those expressed in the forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward- looking statements based on any subsequent developments.