Usha Financial Services Ltd Management Discussions

Financial Year 2024-25 was a year of steady progress for the company UFSL, marked by business expansion, stronger capital position, and continued focus on customercentric lending. Operating in a dynamic economic and regulatory environment, the Company navigated challenges while capitalizing on opportunities in MSME, retail, and emerging green finance segments. This section shares an overview of the broader economic context, industry developments, and UFSLs performance during the year, along with its outlook for the future.

ECONOMIC REVIEW

> GLOBAL ECONOMY:

During FY 2024-25, the global economy navigated a complex landscape marked by moderating inflation, gradual policy easing by major central banks, and continued geopolitical uncertainties. Growth remained uneven across regions, with advanced economies experiencing a slowdown due to tighter financial conditions in the early part of the year, while several emerging markets displayed resilience supported by domestic demand and structural reforms. Energy prices fluctuated amid supply chain adjustments and evolving climate policies, while global trade volumes were impacted by shifting supply routes and regional trade agreements. The outlook for the coming year is cautiously optimistic, with the International Monetary Fund projecting moderate growth as inflationary pressures ease and interest rate cuts begin to stimulate investment. However, downside risks persist from potential geopolitical escalations, volatility in commodity markets, and climate- related disruptions, making adaptability and prudent risk management essential for sustained global recovery.

> INDIAN ECONOMY:

In FY 2024-25, India maintained its position as the fastest-growing major economy, with the Production Linked Incentive (PLI) schemes and easing input costs, while agriculture benefited from a normal monsoon, aiding rural demand. Headline retail inflation averaged close to 5 percent for the year, within the RBIs tolerance band, though food price volatility posed intermittent challenges. External sector performance remained stable, with a manageable current account deficit and healthy foreign exchange reserves exceeding USD 640 billion by year-end. Looking ahead to FY 2025-26, growth is projected to remain in the 6.5 percent range, though risks from global trade tensions, elevated U.S. tariffs, and commodity price swings warrant close monitoring.

INDUSTRY REVIEW

NBFC SECTOR:

During FY 2024-25, Indias NBFC sector demonstrated robust momentum, significantly outpacing traditional banks in credit growth. According to Boston Consulting Group, NBFCs delivered an impressive 20 percent year-on-year growth in net advances, compared to just 12 percent for commercial banks; this propelled total NBFC balances to Rs 28.2 lakh crore, with borrowings rising by 22 percent to Rs 19.9 lakh crore. The share of NBFCs in GDP surged to 26 percent by FY 25, up from 16 percent in FY19, while their portion of systemic credit climbed to 21 percent,

Financial Year 2024-25 was a year of steady progress for the company UFSL, marked by business expansion, stronger capital position, and continued focus on customercentric lending. Operating in a dynamic economic and regulatory environment, the Company navigated challenges while capitalizing on opportunities in MSME, retail, and emerging green finance segments. This section shares an overview of the broader economic context, industry developments, and UFSLs performance during the year, along with its outlook for the future.

ECONOMIC REVIEW

> GLOBAL ECONOMY:

During FY 2024-25, the global economy navigated a complex landscape marked by moderating inflation, gradual policy easing by major central banks, and continued geopolitical uncertainties. Growth remained uneven across regions, with advanced economies experiencing a slowdown due to tighter financial conditions in the early part of the year, while several emerging markets displayed resilience supported by domestic demand and structural reforms. Energy prices fluctuated amid supply chain adjustments and evolving climate policies, while global trade volumes were impacted by shifting supply routes and regional trade agreements. The outlook for the coming year is cautiously optimistic, with the International Monetary Fund projecting moderate growth as inflationary pressures ease and interest rate cuts begin to stimulate investment. However, downside risks persist from potential geopolitical escalations, volatility in commodity markets, and climate- related disruptions, making adaptability and prudent risk management essential for sustained global recovery.

> INDIAN ECONOMY:

In FY 2024-25, India maintained its position as the fastest-growing major economy, with the Production Linked Incentive (PLI) schemes and easing input costs, while agriculture benefited from a normal monsoon, aiding rural demand. Headline retail inflation averaged close to 5 percent for the year, within the RBIs tolerance band, though food price volatility posed intermittent challenges. External sector performance remained stable, with a manageable current account deficit and healthy foreign exchange reserves exceeding USD 640 billion by year-end. Looking ahead to FY 2025-26, growth is projected to remain in the 6.5 percent range, though risks from global trade tensions, elevated U.S. tariffs, and commodity price swings warrant close monitoring.

INDUSTRY REVIEW NBFC SECTOR:

During FY 2024-25, Indias NBFC sector demonstrated robust momentum, significantly outpacing traditional banks in credit growth. According to Boston Consulting Group, NBFCs delivered an impressive 20 percent year-on-year growth in net advances, compared to just 12 percent for commercial banks; this propelled total NBFC balances to Rs 28.2 lakh crore, with borrowings rising by 22 percent to Rs 19.9 lakh crore. The share of NBFCs in GDP surged to 26 percent by FY 25, up from 16 percent in FY19, while their portion of systemic credit climbed to 21 percent, highlighting their growing role in Indias financial ecosystem.

FinTech-led NBFCs played a pivotal role in deepening financial inclusion?sanctioning a record 10.9 crore personal loans amounting Rs to Rs 1.06 lakh crore during the year. The sectors overall scale also expanded dramatically: assets under management (AUM) grew from around Rs 23 trillion in FY19 to Rs 48 trillion at the end of FY 25, reflecting a strong CAGR of 13.2 percent.

Despite this strong growth, certain challenges emerged. The microfinance (MFI) segment suffered sharply?MFIs experienced a 95 percent plunge in profits, exposing vulnerabilities in high-growth portfolios.

Additionally, lending from banks to NBFCs showed restraint: bank credit to NBFCs grew only 5.7 percent over the year, with a notable decline in April 2025, signalling tightened funding conditions.

Looking ahead, the outlook remains positive. Industry analysts anticipate continued expansio n in retail, MSME, and wholesale credit, projecting NBFC credit growth of 1517 percent between FY 25 and FY 28.

Overall, FY 2024-25 confirmed NBFCs as dynamic contributors to Indias credit landscape, while also underscoring the importance of prudent risk management and funding diversification going forward.

OPPORTUNITIES AND THREATS

OPPORTUNITIES:

> Expanding Retail Lending through NBFCs: Retail lending has become a primary growth driver, contributing a significant share of incremental credit growth.

NBFCs are expanding into personal loans, two-wheeler financing, consumer durable loans, etc. Co-lending with banks and fintech partnerships enhance scalability and risk diversification.

> Growing MSME Financing Demand: MSMEs contribute over 30% to GDP and are a key focus under government schemes like ECLGS and Credit Guarantee programs. NBFCs, with flexible underwriting and faster disbursals, remain the preferred choice for this segment.

> Emergence of Green & EV Financing: Policies such as FAME-II and EV incentives are driving adoption. This creates a new credit demand for EVs, batteries, and related infrastructure.

> Digital Transformation: AI/ML-based underwriting, automated KYC, and digital loan origination reduce costs and enhance customer experience. UFSLs digital-first approach aligns with this industry shift.

> Policy and Budgetary Support: The Union Budget 2025-26 introduced measures to ease financing conditions, restore normal risk weights, and boost priority sector lending.

> Partnership Models and Co-Lending: Collaborations with banks, fintechs, and other NBFCs enable product diversification, risk sharing, and efficient expansion.

THREATS:

Asset Quality Risks: MSME and retail segments, though high yielding, are vulnerable to delinquencies during economic slowdowns. Rising unsecured credit in retail may heighten risks.

> Funding and Liquidity Constraints: Smaller NBFCs face higher borrowing costs and limited market access compared to larger peers. Dependence on bank funding adds vulnerability to rate changes.

> Intensifying Market Competition: Large NBFCs, fintech players, and banks are aggressively expanding in MSME and retail lending. Competitive pricing may compress margins.

> Regulatory Compliance Burden: The

Scale-Based Regulatory (SBR) Framework mandates enhanced governance, IT investments, and detailed reporting, increasing compliance costs.

> Macroeconomic Uncertainties: Inflation, rural demand fluctuations, and global disruptions can affect borrower repayment capacity and loan growth. Prolonged high interest rates may also pressure margins.

PRODUCT-WISE PERFORMANCE

During FY 2024-25, the company recorded a total disbursement of Rs 47,352.02 lakh, with lending activity spread across Institutional and Retail segments.

INSTITUTIONAL LENDING:

Institutional Lending remained the largest contributor with Rs 43,590.00 lakh disbursed during the year. This segment generated an Interest Income of Rs 4,035.01 lakh and Processing Fee (PF) Income of Rs 354.95 lakh, underscoring its significance in UFSLs overall business model.

RETAIL LENDING:

Retail Lending, though smaller in scale, witnessed growing traction. The Company disbursed Rs 3,762.02 lakh under this segment, yielding Interest Income of Rs 1,347.38 lakh and PF Income of Rs 62.44 lakh. The increasing adoption of retail lending products is in line with UFSLs strategic push to diversify into MSME and individual borrower segments.

Overall, UFSL generated Interest Income of Rs 5,382.39 lakh and PF Income of Rs 417.39 lakh from its lending operations. This performance reflects both the Companys focus on scaling disbursements and its ability to generate sustainable fee-based income. The growth in both institutional and retail segments demonstrates UFSLs balanced approach?leveraging its established wholesale lending franchise while steadily building its retail presence to diversify risk and broaden customer reach.

OUTLOOK

The outlook for FY 2025-26 remains positive yet cautious for the NBFC sector, underpinned by strong domestic consumption, targeted policy interventions, and robust credit demand from MSMEs and retail segments. Government initiatives, coupled with RBIs regulatory measures, are expected to enhance sector resilience while creating opportunities for well-governed NBFCs.

KEY SECTORAL DRIVERS

> Policy Tailwinds: Reforms under the Union Budget 2025-26, such as easing financing conditions, restoration of normal risk weights on bank exposures to NBFCs, and liquidity support, are expected to lower borrowing costs and strengthen credit flow to priority segments.

> Priority Sector Expansion: Increased focus on MSME financing, women entrepreneurship, and green/EV finance is expected to drive NBFC loan book growth

> Evolving Partnership Models: Co-lending arrangements with banks and strategic collaborations with other financial institutions will continue to open new growth avenues for NBFCs.

COMPANY OVERVIEW

Usha Financial Services Ltd. is an RBI- registered NBFC-ICC (Investment and Credit Company), categorized as a base layer, non- systemically important, and non-deposit taking institution. With over 9 years of lending experience, we specialize in offering customized financial solutions. We cater to a diverse clientele including individuals, women entrepreneurs, MSMEs, corporates, and other NBFCs. Our commitment extends to supporting Electric Vehicle (EV) financing, contributing to sustainable growth and inclusive developmeRs Rs with an AUM size management team, comprising qualified and experienced professionals dedicated to delivering exceptional financial services. UFSL targets niche market with limited access to traditional banking, ensuring attractive yields and solid operating metrics.

FINANCIAL OVERVIEW

(Amount in Lakhs)

Particulars	March 31,2025	March 31,2024
Revenue From Operations	5,963.44	6,322.20
Other Income	98.9	73.85
Total Income	6,062.34	6,396.05
Employee Benefits Expense	312.68	310.24
Finance costs	2,411.49	2,977.74
Depreciation and Amortization Expense	46.54	26.69
Provision & Write-off	624.44	427
Other Expenses	850.19	949.98
Total Expenses	4,245.34	4,691.65
Profit Before Tax	1,817.00	1,704.40
Tax expense	436.89	425.49
Profit After Tax	1,380.11	1,278.91
Statutory Reserve as per Sec 45IC of RBI Act, 1934	276.02	255.78

UFSL-SPECIFIC OUTLOOK

> msme Lending Focus: UFSL aims to deepen its penetration in the MSME sector, capitalizing on government-backed credit guarantee programs and rising demand in underserved markets.

> Green & EV Financing: The company intends to expand its presence in EV financing, benefiting from government incentives and rising adoption trends.

> Capital Strength: With a healthy capital adequacy ratio and conservative leverage, UFSL is well-equipped to pursue growth while maintaining financial stability.

> Governance & Risk Oversight: UFSL will Rs continue to prioritize robust risk management, early delinquency detection, and strong provisioning practices to protect asset quality.

CHALLENGES TO MONITOR

> Funding Cost Pressures: Despite improving liquidity conditions, smaller NBFCs face relatively higher borrowing costs.

> Competitive Market Environment: Increased activity from larger NBFCs and banks in MSME and retail lending could exert pressure on margins.

> Regulatory Compliance: Rising compliance expectations under the SBR framework will demand continued investment in governance and reporting mechanisms.

CONCLUSION

The NBFC sector is poised for regulated growth in FY 2025-26. UFSL, with its strategic focus on MSME and green finance, strong capital structure, and disciplined risk management, is well placed to capitalize on emerging opportunities while navigating potential challenges effectively.

RISKS AND CONCERNS

Usha Financial Services Limited (UFSL) operates in a dynamic environment where multiple financial, operational, and external risks can impact performance. The company has a comprehensive risk management framework, overseen by the Board and its Risk Management Committee, to identify, monitor, and mitigate risks effectively.

> Credit Risk

- Nature of Risk: Credit risk remains the most significant risk, arising from potential default by borrowers, especially in MSME and retail segments.

- Impact: Rising delinquencies can increase provisioning requirements and impact profitability. For FY2025, NBFC sector GNPA averaged around 5-6%.

- Mitigation: UFSL employs risk-based pricing, conservative LTV ratios 3, and continuous monitoring, including stress testing of its loan book.

> Funding and Liquidity Risk

- Nature of Risk: UFSL relies significantly on external borrowings. Volatility in funding markets or tightening of liquidity can raise costs.

- Impact: Higher funding costs compress margins; liquidity shortages may restrict disbursements.

- Mitigation: UFSL maintains liquidity coverage above regulatory requirements and holds a liquidity buffer (approx. 810% of assets).

> Interest Rate Risk

- Nature of Risk: Interest rate fluctuations affect funding cost and asset yields.

?- Impact: Sudden rate increases can compress Net Interest Margins (NIMs).

?- Mitigation: UFSL uses ALM (Asset- Liability Management) practices and periodically adjusts lending/borrowing mix.

> Regulatory and Compliance Risk

- Nature of Risk: Frequent regulatory changes under the RBI Scale-Based Regulatory (SBR) Framework increase compliance demands.

- Impact: Non-compliance could result in penalties or restrictions.

- Mitigation: UFSL has a dedicated compliance team, regular audits, and board-level oversight.

> Operational Risk

- Nature of Risk: Risks from process failures, internal control lapses, or fraud.

- Impact: Financial losses and reputational damage.

- Mitigation: UFSL invests in process standardization, staff training, and robust internal controls.

> Competitive Risk

- Nature of Risk: Competition from large NBFCs, fintechs, and banks in MSME/retail lending segments.

- Impact: Could lead to margin compression and market share loss.

- Mitigation: UFSL focuses on niche lending, customer relationships, and risk-based pricing.

> Macroeconomic and External Risks

? Nature of Risk: Economic slowdowns, inflation, and global disruptions may affect credit demand and repayment.

? Impact: Stress on asset quality and slower growth.

? Mitigation: UFSL adopts conservative provisioning policies and continuously

reassesses exposure to sensitive > Emerging Risks

- Cybersecurity Risk: Growing reliance on digital processes across the NBFC industry has increased cybersecurity threats. UFSL is strengthening IT security and incident response

- ESG and Reputational Risk: Rising stakeholder focus on ESG standards necessitates proactive integration of ESG considerations into business practices.

CONCLUSION

While risks are inherent to the NBFC business model, UFSLs risk management framework?supported by stress testing, strong provisioning, and board oversight? ensures resilience. The companys focus on capital adequacy, asset quality, and governance positions it to navigate uncertainties effectively.

HUMAN RESOURCES

The Company views its people as its most valuable asset and a key driver of sustainable growth. Focus remained on building a skilled, motivated, and adaptable workforce. Efforts were also made to promote an inclusive and collaborative culture, encouraging open communication and teamwork across all levels. The Company remains committed to employee well-being, professional development, and fostering an environment that enables individuals to realize their full potential. As on March 31, 2025, there were total 45 employees on the payroll of the company.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Particulars	As at March 31, 2025	As at March 31, 2024	% Change	Explanation
Current Ratio	2.48	183	35.45%	Decrease in Current Liabilities
Debt-Equity Ratio	0.87	1.71	-48.85%	Increase in Equity through IPO
Interest Coverage Ratio	1.78	1.58	12.39%	Decease in Finance Cost
Return on Net Worth	8.70%	13.55%	-35.78%	Increase in Equity through IPO
Net profit ratio	23.14%	20.23%	14.40%	Decrease in Expenses

* Since Debtors Turnover and Inventory Turnover Ratios are trading or manufacturing sector specific, these are not provided.

INTERNAL FINANCIAL CONTROL

UFSL has established a robust Internal Financial Control framework to ensure financial accuracy, safeguard assets, prevent fraud and maintain regulatory compliance. The framework includes risk assessment, control activities and monitoring mechanisms, with oversight from the Board of Directors through the Audit Committee. Regular internal audits and risk-based reviews help identify control weaknesses and enable timely corrective actions.

The Company enforces stringent financial controls across all business processes, including revenue recognition, expense management, procurement and financial reporting. Technology-driven solutions enhance accuracy and efficiency, reinforcing transparency, accountability and long-term financial stability while ensuring compliance with regulatory standards.

INTERNAL CONTROL SYSTEMS

The operational effectiveness of internal controls, risk management practices and governance systems are reflected in the measures implemented by management. These systems ensure compliance, mitigate risks and enhance overall organisational stability.

The internal audit function plays a crucial role in strengthening organisational resilience by identifying potential risks and evaluating mitigation strategies. The function also conducts audits across all business lines, including retail branch network audits, centralised audits, business audits, concurrent audits and special reviews. Insights gained from these audits have helped management enhance adherence to policies, processes and regulatory guidelines while strengthening the overall control environment. Additionally, audit findings are regularly shared with senior leadership, enabling proactive decision-making and continuous improvements in risk management and governance frameworks.

DISCLOSURE OF ACCOUNTING TREATMENT

Since the company has not followed any treatment in the preparation of financial statements that is different from that prescribed in the Accounting Standards, therefore no such fact has been disclosed in the financial statements. The financial statements have been prepared in accordance with the applicable accounting standards.

FOR AND ON BEHALF OF THE BOARD USHA FINANCIAL SERVICES LIMITED
Sd/-	Sd/-
Rajesh Gupta	Geeta Goswami
Managing Director	Director and CEO
DIN:01941985	DIN:07810522
Address: B-191, Yojna Vihar,	Address: A-236, 1st Floor, Block-A,
Delhi 110092	Opposite Angel mall, Kaushambi, Vasundhra, Ghaziabad- 201012, UP
DATE: 02.09.2025	DATE: 02.09.2025
PLACE: DELHI	PLACE: DELHI