V B Industries Ltd Management Discussions

ANNUAL OVERVIEW AND OUTLOOK

India is set to dominate the global economic landscape, maintaining its status as the fastest-growing large economy for the next two fiscal years. The January 2025 edition of the World Banks Global Economic Prospects (GEP) report projects Indias economy to grow at a steady rate of 6.7% in both FY26 and FY27, significantly outpacing global and regional peers. At a time when global growth is expected to remain at 2.7 per cent in 2025-26, this remarkable performance underscores Indias resilience and its growing significance in shaping the worlds economic trajectory.

The GEP report credits this extraordinary momentum to a thriving services sector and a revitalised manufacturing base, driven by transformative government initiatives. From modernising infrastructure to simplifying taxes, these measures are fuelling domestic growth and positioning India as a cornerstone of global economic stability. With its closest competitor, China, decelerating to 4 per cent growth next year, Indias rise is more than just a statistic. It is a powerful story of ambition, innovation, and unmatched potential.

Complementing the World Bank report, the latest update from the International Monetary Funds (IMF) World Economic Outlook (WEO) also reinforces Indias strong economic trajectory. The IMF forecasts Indias growth to remain robust at 6.5% for both 2025 and 2026, aligning with earlier projections from October. This consistent growth outlook reflects Indias stable economic fundamentals and its ability to maintain momentum despite global uncertainties. The continued strength of Indias economic performance, as projected by both the World Bank and IMF, underscores the countrys resilience and highlights the sustained strength of its economic fundamentals, making India a crucial player in the global economic landscape.

Indias remarkable economic trajectory is a testament to its vision of inclusive growth and innovation-driven development. By implementing forward-thinking policies, fostering a robust infrastructure, and embracing digital transformation, the nation is redefining its global standing. As the fastest-growing large economy, with steady growth projected at 6.7% over the next two fiscal years, India continues to outpace global peers and cement its position as a leader in economic resilience and progress. From the Goods and Services Tax unifying the market to initiatives like Startup India and the Production Linked Incentive Scheme bolstering entrepreneurship and manufacturing, the nation is building a dynamic and robust economy. With this momentum, India is set to shape the future of the global economy, exemplifying the power of ambition, resilience, and strategic governance in achieving unparalleled progress.

INDUSTRY OVERVIEW

Despite current volatility, Indias financial ecosystem has seen remarkable progress, delivering sustained growth as compared to its global counterparts. By the end of December 2024, India had outpaced its peers in emerging markets. The Nifty 50 index, despite global uncertainties, delivered positive returns, and the BSE market capitalization reached a staggering ^445.2 lakh crore. These figures are reflective of the countrys ability to attract capital and foster investor confidence.

What stands out in this growth story is the sharp increase in investor participation. The pandemic served as a catalyst for individuals and households to enter the market, and the momentum has only continued to grow. Demat accounts have surged by 33% to 18.5 crore as of December 2024, while the number of unique investors in mutual funds has reached 5.6 crore.

The Indian household is transitioning from a culture of saving to a culture of investing. Net investments in the NSEs cash market segment have reached ^4.4 lakh crore in the past five years, with record inflows in 2024 alone. This surge in investment has translated into substantial wealth creation, with household wealth increasing by ^40 lakh crore over the same period.

This shift in investor behaviour more individual investors, greater frequency of trades, and substantial net inflows has turned the Indian market into a more inclusive and diverse platform. In fact, for the first time, individual investors ownership in NSE-listed companies (17.6%) has surpassed that of Foreign Portfolio Investors (FPIs), underscoring the growing importance of domestic capital.

OPPORTUNITIES & THREATS

Indias primary markets are buzzing with activity. Resource mobilization has reached ?ii.i lakh crore in just the first nine months of FY25, exceeding the total raised in FY24. The IPO market is particularly vibrant, with a 32.1% jump in listings and a 150% surge in average deal size - reflecting a growing appetite for equity-based financing. Moreover, Indias growing global clout is undeniable, accounting for a remarkable 30% of global IPO listings in 2024, up from 17% the previous year.

While this surge in participation is encouraging, it does come with challenges. The increase in consumer credit and unsecured lending signals a potential risk to financial stability. With so many young investors entering the market, its imperative that the regulatory framework evolves to support this growth while ensuring the stability of the market. The role of the Securities and Exchange Board of India (SEBI) will be pivotal. The regulators recent efforts to temper market excesses and promote sustainable growth are steps in the right direction. However, the rapid rise in retail investor participation calls for enhanced financial literacy and investor protection measures.

The rise of investor interest is not a passing trend; its a structural shift that will continue to shape the market for years to come. As financial literacy improves and access to technology expands, even more individuals will participate in the growth story of India.

As we see increasing individual participation, the role of the retail investor will only become more important. The growing domestic investor base provides a layer of resilience to the market, reducing its dependence on Foreign Portfolio Investors (FPIs). This shift in market dynamics should not be underestimated—it positions India as a unique player in the global market, less susceptible to external shocks.

The future will likely see even more transformative shifts. As technology continues to evolve, new platforms will emerge that democratize access to investment opportunities. Indias growing fintech ecosystem is an example of how technology can make investing more inclusive and accessible, enabling millions of new investors to participate in the capital markets.

RISKS AND CONCERNS

V B Industries Ltd. (VBIL) has exposures in various line of business. VBIL are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.

MARKET RISK

The Company has quoted investments which are exposed to fluctuations in stock prices. VBIL continuously monitors market exposure in equity and, in appropriate cases, also uses various derivative instruments as a hedging mechanism to limit volatility.

LIQUIDITY AND INTEREST RATE RISK

The Company is exposed to liquidity risk principally, because of lending and investment for periods which may differ from those of its funding sources. Management team actively manages asset liability positions in accordance with the overall guidelines laid down by various regulators. The Company may be impacted by volatility in interest rates in India which could cause its margins to decline and profitability to shrink. The success of the Companys business depends significantly on interest income from its operations. It is exposed to interest rate risk, both as a result of lending at fixed interest rates and for reset periods which may differ from those of its funding sources. Interest rates are highly sensitive to many factors beyond the Companys control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and, inflation. As a result, interest rates in India have historically experienced a relatively high degree of volatility.

The Company seeks to match its interest rate positions of assets and liabilities to minimize interest rate risk. However, there can be no assurance that significant interest rate movements will not have an adverse effect on its financial position.

HUMAN RESOURCE DEVELOPMENT

The Company recognizes that its success is deeply embedded in the success of its human capital. During 2024-25, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable to the Company.

COMPLIANCE

The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company continues to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Companys Board of Directors and the Companys Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis.

The Company has complied with all requirements of regulatory authorities. No penalties/strictures were imposed on the Company by stock exchanges or SEBI or any statutory authority on any matter related to capital market during the last three years.