Mukesh Babu Financial Services Ltd Management Discussions

The management wishes to present its Analysis Report.

A. FINANCIAL REVIEW

Your Companys Income from Operations has decreased from Rs.3,82,841 Thousands to 2,13,362 Thousands (Decrease of 44.27%). Profit before Interest, Depreciation and Tax has decreased from Rs.1,81,436 Thousands to 45,688 Thousands (Decrease of 74.82%) and Profit after Tax has decreased from Rs.36,427 Thousands to Rs.20,990 Thousands (Decrease of 42.38%) Details of Changes in key financial ratio are as follows:

B. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The internal control systems and their adequacy have been discussed in detail in the

Directors Report.

C. MACRO ECONOMY - REVIEW AND OUTLOOK

The global economy grew by 5.9% in 2021 following a contraction of 3.1% in 2020 (Source: IMF World Economic Outlook, January 2022). However, the growth momentum started slowing towards the end of 2021, as the effects of fiscal and monetary stimuli dissipated along with the onset of the Omicron variant of COVID-19.The successful rollout of the worlds largest vaccination drive, pick-up in government expenditure and better preparedness compared with the first wave limited the negative economic impact this time. While the early forecast for global economic growth in 2022 is pegged at 4.4% (Source: IMF World Economic Outlook, January 2022), the recent geo-political tensions and conflict in Ukraine along with emergence of new COVID-19 variants will weigh on global growth projections and also lead to high inflation in the short term.

D. INDUSTRY STRUCTURE AND DEVELOPMENTS

NBFCs had been adversely impacted by the pandemic due to their underlying business model. Demand side drivers being significantly impacted, it became difficult for NBFCs to find creditworthy projects and borrowers to lend to as a result of the pandemic induced stress. This got compounded with asset quality issues as ability of borrowers to service their instalments had been impacted.

Asset quality may also pose challenges for some NBFCs in the first half of fiscal 2023.

However, the fiscal is largely expected to build upon the momentum gained in the previous two quarters and see a sustained gradual growth path through the year, barring surprises on the covid front or extended fallout of the geopolitical strife.

ENVIRONMENT AND FUTURE PROSPECTS

New business opportunities are expected to gain further momentum as covid lies low with near complete normalisation of economic activities. Steps taken earlier by NBFCs to navigate the pandemic should hold them in good stead as measures like digitalisation across customer lifecycles, alternate data sources for underwriting, greater focus on asset quality plays out beneficially during this fiscal.

However, with the continuing uncertainty luring around the economy & Markets world over its difficult to fathom as to what the months to come have in store for the sector.

(Data Sources: Industry, RBI and Rating Agency reports)