Usha Financial Services Ltd Management Discussions

The following discussion is intended to convey managements perspective on our financial condition and results of operations for the financial year ended March 31, 2024, March 31, 2023, and March 31, 2022. One should read the following discussion and analysis of our financial condition and results of operations in conjunction with our section titled "Financial Statements " and the chapter titled "Financial Information " on page 249 of the Draft Red Herring Prospectus. This discussion contains forward-looking statements and reflects our current views with respect to future events and our financial performance and involves numerous risks and uncertainties, including, but not limited to, those described in the section entitled "Risk Factors " on page 31 of this Draft Red Herring Prospectus. Actual results could differ materially from those contained in any forward looking statements and for further details regarding forward-looking statements, kindly refer the chapter titled "Forward-Looking Statements " on page 19 of this Draft Red Herring Prospectus. Unless otherwise stated, the financial information of our Company used in this section has been derived from the Restated Financial Information. Our financial year ends on March 31 of each year. Accordingly, unless otherwise stated, all references to a particular financial year are to the 12-month period ended March 31 of that year.

In this section, unless the context otherwise requires, any reference to "we", "us" or "our" refers to Usha Financial Services Limited (Formerly Known as Usha Financial Services Private Limited), our Company. Unless otherwise indicated, financial information included herein are based on our Restated Financial Statements for the period 31 March 2024, and Financial Years 2023 & 2022 included in this Draft Red Herring Prospectus beginning on page 249 of this Draft Red Herring Prospectus.

BUSINESS OVERVIEW

We are a non-banking finance company ("NBFC") incorporated in the year 1995 registered with the Reserve Bank of India as a NBFC-ICC (Investment & Credit) - base layer- non-systemically important non-deposit taking NBFC with over 9 years of lending experience. We provide lending solutions to fellow NBFCs and corporates, MSMEs, and individual, particularly to women entrepreneurs. Our services also extend to Electric vehicle (EV) financing. We provide a diversified range of financial products to individuals, body corporates, NBFCs and MSMEs.

SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST FINANCIAL YEAR AND STUB PERIOD

As per mutual discussion between the Board of the Company and BRLMs, in the opinion of the Board of the Company there have not arisen any circumstances since the date of the last financial statements as disclosed in the Draft Red Herring Prospectus and which materially and adversely affect or is likely to affect within the next twelve months except as follows:

• The Board of Directors of our Company has approved and passed a resolution on July 02, 2024, to authorize the Board of Directors to raise the funds by way of Initial Public Offering.

• The Shareholders of our company appointed Mr. Rajesh Gupta as Managing Director w.e.f. 12 June, 2023 in the Extra Ordinary General Meeting.

• The shareholders of our Company appointed Ms. Nimisha Jain as an Independent Directors in the Extra Ordinary General Meeting held on 10 June 2024.

• The shareholders of our Company appointed Mr. Pankaj Jain as an Independent Directors in the Extra Ordinary General Meeting held on 10 June 2024.

• The board of directors in its meeting held on 03 February 2024, appointed Ms. Kritika Goswami as

Company Secretary & Compliance officer of the Company & appointed Mr. Prashant Raghuwanshi as Chief Financial Officer of the Company w.e.f. June 01, 2024, respectively.

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our business is subjected to various risks and uncertainties, including those discussed in the section titled Risk Factor" beginning on page 31 of this Draft Red Herring Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:

• Changes, if any, in the regulations / regulatory framework / economic policies in India and / or in foreign countries, which affect national & international finance.

• Company s results of operations and financial performance;

• Performance of Companys competitors;

• Significant developments in India‘s economic and fiscal policies;

• Volatility in the Indian and global capital market;

MANAGEMENTS DISCUSSION ON RESULTS OF OPERATION

Particulars	For the Period ended		For the Period ended		For the Period ended
	31-Mar- 24	%age of Total Income	31- Mar-23	%age of Total Income	31- Mar-22	%age of Total Income
I. Revenue from operations	6,322.20	98.85%	4,563.17	98.80%	2,502.62	98.86%
II. Other Income	73.85	1.15%	55. 56	1.20%	28. 74	1.14%
III. Total Income (I +II)	6,396.05	100. 00%	4,618.73	100. 00%	2,531.36	100.00%
IV. Expenses:
(a) Employee benefits expenses	310.24	4.85%	250.09	5.41%	229.77	0.09
(b) Finance costs	2,977.74	46.56%	2,150.47	46.56%	1,042.89	0.41
(c) Depreciation and amortisation expenses	26.69	0.42%	22.89	0.50%	32.25	0.01
(d) Provision & Write-off	358.98	5.61%	44.23	0.96%	263.25	0.10
(e) Other expenses	949.98	14.85%	772 .21	16.72%	415 .29	0.16
Total Expenses	4,623.63	72.2 9%	3,239.89	70.1 5%	1,983.45	0.78
V. Profit before Exceptional and Extraordinary Items and Tax (III - IV)	1,772.42	27.71%	1,378.84	29.85%	547.91	0.22
VI. Exceptional Items	-		-		-
VII. Profit before extraordinary items and tax	1,772.42	27.7 1%	1,378.84	29.8 5%	547.91	0.22
VIII. Extraordinary Items			-		-
IX. Profit before tax (VII-VIII)	1,772.42	27.7 1%	1,378.84	29.8 5%	547 .91	0.22
X. Tax expense:
(i) Current tax	443.20	6.93%	371.56	8.04%	147.25	0.06
(ii) Tax for earlier years	-		-		-
(iii) Deferred tax	(15.73)	-0.25%	(9.27)	-0.20%	(13.76)	(0.01)
XI. Profit/ (Loss) from the period from continuing operations (IX - X)	1,344.95	21.03%	1,016.55	22.01%	414.42	0.16
XII. Profit/ (Loss) from discontinuing operations	-		-		-
XIII. Tax expense of discounting operations	-		-		-
XIV. Profit/(Loss) from Discontinuing operations	-		-		-
XV. Profit/ (Loss) for the period (XI + XIV)	1,344.95	21.0 3%	1,016.55	22.0 1%	414 .42	0.16
XVI. Earnings per equity shares (of Rs. 10/- each)
(i) Basic	8.64		7.42		3.51
(ii) Diluted	8.64		7.42		3.51

Our Significant Accounting Policies

For Significant accounting policies please refer Significant Accounting Policies", under Chapter titled Financial Statements beginning on page 249 of the Draft Red Herring Prospectus.

Overview of Revenue & Expenditure

The following discussion on results of operations should be read in conjunction with the Restated Financial statements for the Financial years 2023-24, Financial Year 2022- 2023, Financial Year 2021-22. Our revenue and expenses are reported in the following manner:

Revenues

Revenue of operations

Our Companys revenue is primarily generated from Interest and Processing and other fees.

Other Income

Other Income includes interest income on fixed deposit, Profit on sale of fixed assets and Bad debts recovered.

Expenditure

Our total expenditure primarily consists of Employee benefit expense, Finance Costs, Depreciation and amortization expense, Provision & Write-off and Other Expenses.

Employee benefit expense

The Employee benefit expense includes Salaries and wages, Directors Remuneration and Staff welfare expenses

Finance Cost

Finance cost expense include interest on loan, Interest on OD limit, Interest on FLDG, Interest on NonConvertible Debentures and Other Borrowing Cost.

Depreciation and Amortization Expenses

Depreciation Expenses majorty includes depreciation on Furniture & Fixtures, Vehicles, Computers and Office Equipments and Amortization expenses includes on intangible assets.

Provision & Write-off

The Provision & Write-off includes provision for standard Assets and for sub-standard Assets & Doubtful Assets and Loan write off during the period .

Other Expenses

Other Expenses include major expenses on Professional & Technical Fees, Portfolio Management Fees, Rent, Travelling Expenses and other expenses.

PERIOD ENDED March 31, 2024, COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2023 (BASED ON RESTATED STANDALONE FINANCIAL STATEMENTS)

Revenues

Total Income

Total Income for the period ended March 31, 2024, stood at Rs. 6,396.05 Lakhs whereas in Financial Year 2022-23 it stood at Rs 4,618.73 Lakhs representing an increase of 38.48%.

Reason: The increase in total income of the company is due to a significant increase in the revenue of the company and general growth in the business operations of the Company.

Revenue of operations

Net revenue from operations for the period ended March 31, 2024, stood at Rs. 6,322.20 Lakhs whereas in Financial Year 2022-23 it stood at Rs. 4,563.17 Lakhs representing an increase of 38.55%.

Reason: The significant increase in revenue is because of increase in disbursement of loan. The disbursement of loans increased in the second half of the last financial year which thereby increase in interest income. It is the main reason for the increase in revenue of the company.

Particulars	FY 2024	FY 2023
Interest Income from Financing Activities	5,862.77	4,054.42
Processing and Other Fees	459.43	508.75
Total	6,322.20	4,563.17

Other Income

Other Income for the Period ended March 31, 2024, stood at Rs. 73.85 Lakhs whereas in the Financial Year 2022-23 it stood at Rs. 55.56 Lakhs representing an increase of 32.92%.

Reason: The Increase in other income is due to increase in Interest on fixed deposits, Profit on sale of Fixed Assets and some Bad debts recovered.

Expenditure

Total Expenses

Total Expenses for the Period ended March 31, 2024, stood at Rs. 4,623.63 Lakhs whereas in the Financial Year 2022-23 it stood at Rs 3,239.89 Lakhs representing an increase of 42.71%.

Reason: Total Expenses for the Financial Year ending on March 31, 2024, have witnessed a notable increase of 42.71%. This rise can be attributed to the increase in various factors, including an increase in the Employee benefit expenses, Finance cost, Depreciation and amortization expenses, Provision & Write off and other expenses.

Employee benefit expense

The Employee benefit expense for the Period ended March 31, 2024, stood at Rs. 250.09 Lakhs whereas in Financial Year 2022-23 it stood at Rs. 310.24 Lakhs representing an increase of 24.05%.

Reason: There has been a significant increase in Employee benefit expenses in the financial year 2024 as compared to financial year 2023. The increase in the salary and wages of employees and Staff Welfare

Expense is also increased.

Particulars	FY 2024	FY 2023
Salary and wages	167.06	126.85
Director Remuneration	117.93	107.20
Contribution to provident and other funds	13.33	10.42
Gratuity Expense	6.81	2.49
Staff Welfare	5.11	3.13
Total	310.24	250.09

Finance Cost

The Finance Cost for the period ended on March 31, 2024, stood at Rs. 2,977.74 Lakhs whereas in the Financial Year 2022-23 it stood at Rs. 2,150.47 Lakhs representing an increase of 38.47% from the previous years.

Reason: This increase is primarily due to the increase in Short term Borrowing and Long term borrowings and hence it interest was also increased.

Depreciation and Amortization Expenses

The Depreciation and Amortization Expenses for the Period ended March 31, 2024, stood at Rs. 26.69 Lakhs whereas in the Financial Year 2022-23 it stood at Rs. 22.89 Lakhs representing an increase of 16.60%.

Reason: This increase is primarily due to the purchase of fixed assets which includes mainly Vehicles, furniture, computer, office Equipments resulting in increase of Depreciation Expenses.

Provision & Write-off

The Provision & Write-off for the Period ended March 31, 2024, stood at Rs. 358.98 Lakhs whereas in Financial Year 2022-23 it stood at Rs. 44.23 Lakhs representing an increase of 711.62%.

Reason: Major reason for increase in Provision & Write-off expenses was due to increase in write-off during the period and provision was also made on substandard & doubtful assets.

Particulars	FY 2024	FY 2023
Provision on Standard Assets	(13.73)	51.73
Provision on Sub-standard & Doubtful Assets	83.95	(17.51)
Loan Write off during the period	288.76	10.01
Total	358.98	44.23

Other Expenses

The Other Expenses for the Period ended March 31, 2024, stood at Rs. 949.98 Lakhs whereas in Financial Year 2022-23 it stood at Rs. 772.21 Lakhs representing an increase of 23.02%.

Reason: Major increase in other expenses could be seen in due to increase Professional Fee, Portfolio & Technical Fee, Office Rent & Office Expenses and other expenses also increases.

Particulars	FY 2024	FY 2023
Professional Fee	105.67	128.90
Portfolio & Technical Fee	722.11	441.58
Rent	23.95	24.39
Travelling Expenses	24.70	12.59
Office Expenses	15.58	15.02

Restated Profit before Tax

The restated profit before tax for the Period ended March 31, 2024, stood at Rs. 1,772.42 Lakhs whereas in Financial Year 2022-23 it stood at Rs. 1,378.84 Lakhs representing an increase of 28.54%.

Tax Expense

Tax Expense for the period ended March 31, 2024, stood at Rs. 427.47 lakhs out of which Current Tax being Rs. 443.20 lakhs and Deferred Tax being Rs. (15.73) lakhs whereas in Financial year 2022-23 it stood at Rs. 362.29 Lakhs out of which Current Tax being Rs. 371.56 and Deferred Tax being Rs. (9.27) Lakhs representing as increase of 17.99%.

Reason: The major reason for the increase in Tax is due to increase in revenue and constant growth of company.

Restated Profit after Tax

The restated profit after tax for the Period ended March 31, 2024, stood at Rs. 1,344.95 Lakhs whereas in Financial Year 2022-23 it stood at Rs. 1,016.55 Lakhs representing an increase of 32.31%.

Reason: The increase in the profit after tax is attributed to:

1. Increase in Disbursement of loan and increase no. of customer.

PERIOD ENDED MARCH 31, 2023, COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2022 (BASED ON RESTATED FINANCIAL STATEMENTS)

Revenues

Total Income

Total Income for the period ended March 31, 2023, stood at Rs. 4,618.73 Lakhs whereas in Financial Year 2021-22 it stood at Rs 2,531.36 Lakhs representing an increase of 82.46%.

Reason: The increase in total income of the company is due to a significant increase in the revenue of the company and general growth in the business operations of the Company.

Revenue of operations

Net revenue from operations for the period ended March 31, 2023, stood at Rs. 4,563.17 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 2,502.62 Lakhs representing an increase of 82.34%.

Reason: The significant increase in revenue is because of the increase in disbursement of loans during the year which thereby increases the overall interest income of the company. It is the main reason for the increase in revenue of the company.

Particulars	FY 2023	FY 2022
Interest Income from Financing Activities	4,054.42	2,274.20
Processing and Other Fees	508.75	228.42
Total	4,563.17	2,502.62

Other Income

Other Income for the Period ended March 31, 2023, stood at Rs. 55.56 Lakhs whereas in the Financial Year 2021-22 it stood at Rs. 28.74 Lakhs representing an increase of 93.32%.

Reason: The Increase in other income is due to increase in Interest on fixed deposits.

Expenditure

Total Expenses

Total Expenses for the Period ended March 31, 2024, stood at Rs. 3,239.89 Lakhs whereas in the Financial Year 2021-22 it stood at Rs.1,983.45 Lakhs representing an increase of 63.35%.

Reason: Total Expenses for the Financial Year ending on March 31, 2023, have witnessed a notable increase of 63.35%. This rise can be attributed to the increase in various factors, including an increase in the Employee benefit expenses, Finance cost, Depreciation and amortization expenses and other expenses.

Employee benefit expense

The Employee benefit expense for the Period ended March 31, 2023, stood at Rs. 250.09 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 229.77 Lakhs representing an increase of 8.84%.

Reason: There has been a significant increase in Employee benefit expenses in the financial year 2023 as compared to financial year 2022. The increase in the salary and wages of employees and Staff Welfare Expense is also increased.

Particulars	FY 2023	FY 2023
Salary and wages	126.85	118.53
Director Remuneration	107.20	97.20
Contribution to provident and other funds	10.42	9.67
Gratuity Expense	2.49	0.20
Staff Welfare	3.13	4.17
Total	250.09	229.77

Finance Cost

The Finance Cost for the period ended on March 31, 2023, stood at Rs. 2,150.47 Lakhs whereas in the Financial Year 2021-22 it stood at Rs. 1,042.89 Lakhs representing an increase of 106.20% from the previous year.

Reason: This increase is primarily due to the increase in short term Borrowing and Long term borrowings and hence it interest was also increased because of we increase our disbursement of loan amount and increase our loan book.

Depreciation and Amortization Expenses

The Depreciation and Amortization Expenses for the Period ended March 31, 2023, stood at Rs. 22.89 Lakhs whereas in the Financial Year 2021-22 it stood at Rs. 32.25 Lakhs representing an decrease of 29.02%.

Reason: This decrease is primarily due to the no future purchase of fixed assets.

Provision & Write-off

The Provision & Write-off for the Period ended March 31, 2023, stood at Rs. 44.23 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 263.25 Lakhs representing a decrease of 83.20%.

Reason: This decrease of expenses due to there is less write-off during the year as compared to the last year are as follow

Particulars	FY 2023	FY 2022
Provision on Standard Assets	51.73	10.48
Provision on Sub-standard & Doubtful Assets	(17.51)	40.92
Loan Write off during the period	10.01	211.85
Total	44.23	263.25

Other Expenses

The Other Expenses for the Period ended March 31, 2023, stood at Rs. 772.21 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 415.29 Lakhs representing an increase of 85.94%.

Reason: Major increase in other expenses could be seen in due to increase Professional Fee, Portfolio & Technical Fee, Office Rent & Office Expenses and other expenses also was increases.

Particulars	FY 2023	FY 2022
Professional Fee	128.90	100.41
Portfolio & Technical Fee	441.58	235.50
Rent	24.39	22.36
Travelling Expenses	12.59	5.93
Office Expenses	15.02	8.75

Restated Profit before Tax

The restated profit before tax for the Period ended March 31, 2023, stood at Rs. 1,378.84 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 547.91 Lakhs representing an increase of 151.65%.

Tax Expense

Tax Expense for the period ended March 31, 2023, stood at Rs. 362.29 lakhs out of which Current Tax being Rs. 371.56 lakhs and Deferred Tax being Rs. (9.27) lakhs whereas in financial year 2021-22 it stood at Rs. 133.49 Lakhs out of which Current Tax being Rs. 147.25 Lakhs and Deferred Tax being Rs. (13.76) Lakhs representing as increase of 171.40%.

Reason: The major reason for the increase in Tax is due to the increase in revenue and constant growth of the company.

Restated Profit after Tax

The restated profit after tax for the Period ended March 31, 2023, stood at Rs. 1,016.55 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 414.42 Lakhs representing an increase of 145.29%.

Reason: The increase in the profit after tax is attributed to:

• Increase in Disbursement of loan and increase no. of customer.

INFORMATION REQUIRED AS PER ITEM (II) (C) (I) OF PART A OF SCHEDULE VI TO THE SEBI REGULATIONS:

1. Unusual or infrequent events or transactions

Except as described in this Draft Red Herring Prospectus, during the periods under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations.

Other than as described in the section titled Risk Factors beginning on page 31 of this Draft Red Herring Prospectus, to our knowledge there are no known significant economic changes that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

Other than as described in this Draft Red Herring Prospectus, particularly in the sections Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations on pages 31 and 288, respectively, to our knowledge, there are no known trends or uncertainties that are expected to have a material adverse impact on our revenues or income from continuing operations.

4. Income and Sales on account of major product/main activities

The income and sales of our Company on account of major activities derives from the business is carrying and forward activites.

5. Future changes in the relationship between costs and revenues, in case of events such as future increase in cost of service and freight & forwarding expenses that will cause a material change are known.

Our Companys future costs and revenues can be indirectly impacted by an increase in the cost of services and freight & forwarding expenses.

6. Future relationship between Costs and Income

Our Companys future costs and revenues will be determined by competition, demand/supply situation, interest rates quoted by banks & others.

7. The extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.

Increases in our revenues are by and large linked to increases in the volume of business.

8. Total turnover of each major industry segment in which the issuer company operates.

The Company operates in the Financial Sector. Relevant industry data, as available, has been included in the chapter titled "Our Industry" beginning on page 126 of this Draft Red Herring Prospectus.

9. Status of any publicly announced new products or business segments.

Our Company has not announced any new services and segment / scheme, other than disclosure in this Draft Red Herring Prospectus.

10. The extent to which the business is seasonal.

Our business is not seasonal in nature.

11. Competitive Conditions

We face competition from existing and potential competitors, which is common for any business. We have, over a period of time, developed certain competitive strengths which have been discussed in the section titled Our Business on page 150 of this Draft Red Herring Prospectus.