Viji Finance Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

GLOBAL ECONOMIC OVERVIEW

Despite enduring three turbulent years marked by a global pandemic, supply chain disruptions, ongoing conflict in Ukraine, and elevated interest rates aimed at curbing high inflation, India emerged as by far the worlds fastest-growing major economy. Calendar Year (CY) 2024 began with optimism, as inflation seemed largely under control and major economies were expected to avoid recession. These expectations proved accurate. However, as the year ended, it became clear that global inflation was more persistent than anticipated. And while the United States of America experienced robust growth, most other advanced economies did not. Additionally, many economies faced currency depreciation, posing potential disruptions, particularly for developing nations.

According to the IMF s World Economic Outlook (April 2025), global growth has been projected at 2.8% in 2025 and 3.0% in 2026, which is below the historical average of 3.7% for the period 2000-2019. It is worth noting that at 6.5% for FY 2025 and FY 2026, the IMF pegs India s real GDP growth as the highest among all major nations including that of China. IMF also forecasts global headline inflation to decline to 4.3% in CY 2025 and further to 3.6% in CY 2026.

The second advance estimate of national income for FY 2025, released by the National Statistics Office (NSO) on 28 February 2025, has pegged real GDP growth at be 6.5% versus 9.2% (1st revised estimate) in FY 2024.

INDUSTRY OVERVIEW AND OUTLOOK

Non-Banking Financial Companies (NBFCs) have emerged as powerful engines of credit, significantly expanding access to financial services, especially for historically underserved or excluded segments. By complementing the traditional banking system, NBFCs have utilised innovative credit delivery models that leverage technology and local insights to create customised financial products tailored to diverse borrower needs. Their agility and close customer connections have enabled them to play a role that is not only complementary to traditional banks but also catalytic in building a financial ecosystem characterised by deeper intermediation and wider opportunities.

NBFCs in India

The future of NBFCs in India is promising, with opportunities for growth driven by digitization, niche specialization, and focus on underserved markets. However, navigating the evolving regulatory landscape, embracing technology responsibly, and prioritizing customer experience will be crucial for success. By adapting to these trends and predictions, NBFCs can continue to play a significant role in the future of financial services in India.

The Non-Banking Financial Companies (NBFCs) sector has long been a cornerstone of the financial ecosystem, especially in emerging markets where they play a crucial role in extending credit & financial services to underserved segments. These institutions, known for their agility and innovative financial solutions, often serve as a bridge between traditional banks and the unbanked population, driving financial inclusion and economic growth.

As NBFCs have become more significant, the RBI has enhanced its regulation of the sector to address the industry specific issues such as contagion risk in the financial system, oversimplified underwriting processes, concentration of credit risk, exposure towards technology related risks, etc. Accordingly, the RBI, over last few years, has issued various guidelines on (i) vigil over asset-liability management practices, (ii) maintaining liquidity ratios, (iii) increased reporting requirements, and (iv) scale-based regulations. These have led to NBFCs adopting practices in line with banks. The regulatory vigil is based on four key cornerstones of: (i) responsible financial innovation, (ii) accountable conduct, (iii) responsible governance, and (iv) centrality of the customer.

Confronted with the risk of a spillover effect in the financial services industry, the Reserve Bank of India (RBI) is now taking no chances. The regulator has responded by tightening regulations and intensifying scrutiny of NBFCs in the last couple of years. These changes aim to address governance issues, strengthening risk management practices, and ensure higher level of supervision.

The RBI has also imposed restrictions on banks lending to NBFCs by increasing risk weights. This move is aimed at safeguarding banks balance sheets, considering the aggressive lending by banks to NBFCs in recent years. Banks have been increasing their unsecured lending while also indirectly taking exposure to risky assets through NBFC lending. This includes lending to fintech NBFCs by relying on algorithms and extending credit to new borrower categories which lack credible credit history.

In a recent directive, the RBI has introduced guidelines for banks and NBFCs lending to Alternative Investment Funds (AIFs) with dual exposure to a specific entity. Banks and NBFCs are now restricted from investing in AIF schemes that have investments, either directly or indirectly, in their existing borrower company.

OPPORTUNITIES AND THREATS

Opportunities

- Growing Demand for Financial Services: Increasing need for financial assistance among individuals and corporates

- Expanding Customer Base: The company can tap into new markets and customer segments

- Digitalization: Leveraging technology to enhance customer experience and improve operational efficiency

Threats

- Regulatory Changes: Changes in NBFC regulations may impact operations

- Market Volatility: Fluctuations in market conditions may affect financial performance

- Credit Risk: Exposure to credit risk due to loan defaults

SEGMENT-WISE PERFORMANCE

The Company operates only in one segment i.e. Finance services.

OUTLOOK

Viji Finance Limited is poised for growth, driven by its strong brand reputation, customized financial products, and expanding customer base. The company will focus on:

- Expanding Geographic Presence: Entering new markets and regions to increase reach

- Digitalization: Leveraging technology to enhance customer experience and improve operational efficiency

- Product Diversification: Introducing new financial products and services to cater to evolving customer needs

RISKS AND CONCERN

- Credit Risk: The company faces credit risk due to loan defaults, which is managed through robust credit assessment and monitoring processes

- Market Risk: Viji Finance is exposed to market risk due to fluctuations in interest rates and market conditions, which is mitigated through diversification and hedging strategies

- Operational Risk: The company faces operational risk due to internal processes and systems, which is managed through regular audits and process improvements

- Risk Management Framework: The company has a robust risk management framework in place, with a risk management committee overseeing risk assessment and mitigation

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Our Company has well-established internal controls, executed via various regulations and protocols that are assessed regularly across all sections of the business. Our credit departments have implemented strategies to identify potential risks, as well as develop solutions to combat them. Moreover, the key figures within each section of the organization are keenly monitoring any mitigating steps taken. Our company has an internal audit function that is responsible for independently evaluating the adequacy and effectiveness of all internal controls, information security controls, risk management, governance systems and processes. The Audit Committee of the Board also reviews the performance of the Audit and Compliance functions and reviews the effectiveness of controls and compliance with regulatory guidelines.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Financial and operational performance forms part of the Annual Report and is presented elsewhere in the report.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED HUMAN RESOURCES

There has been positive working relationship between the Company and the employees of the Company during the year. The Company strives to provide conducive working environment to its employees and to maintain the pace with the economic situations, Company has always focused on enhancing the efficiency of the employees including restructuring their compensation, working conditions etc.

Accordingly, the Company has evaluated the performance of employees during the year under review to retain the motivation among the employees of the Company.

As on 31st March, 2025, Company had 27 employees.

INDUSTRIAL RELATIONS

Company s Industrial relations continued to be healthy, cordial and harmonious during the period under review.

DETAILS OF SIGNIFICANT CHANGES IN THE KEY RATIOS AND RETURN ON NET WORTH

As per the amendment made under Schedule V to the Listing Regulations read with Regulation 34(3) of the Listing Regulations, details key financial ratios and any changes in return on net worth of the Company are given below:

Particulars	2024-25	2023-24	Change	Reason for Change
Debtors turnover ratio	N.A.	N.A.	N.A.	N.A.
Inventories turnover ratio	N.A.	N.A.	N.A.	N.A.
Interest coverage ratio	1.47	1.02	43.70%	Due to Increase in Profit for the year, Interest coverage ratio is also increased in current year
Current ratio	2.55	0.65	291.80%	Increase due to Improved Liquidity, Stronger asset position and better liability Management
Debt-Equity ratio	0.59	1.09	(46.00%)	During the year, Shareholders equity has risen significantly due to right issue
Operating profit margin (%)	23.30	0.32	(27.30%)	Increase in operating profit is due to Higher revenue
Net profit margin (%) or sector- specific equivalent ratio as applicable	5.76	0.06	(4.00%)	Increase in net profit

DETAILS OF CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR

There is an increase of 19.80% in Return of Net Worth as compared to previous Financial Year due to increased net profit.

CAUTIONARY STATEMENT

This report contains forward-looking statements extracted from reports of Government Authorities / Bodies, Industry Associations etc. available on the public domain which may involve risks and uncertainties including, but not limited to, economic conditions, government policies, dependence on certain businesses and other factors. Actual results, performance or achievements could differ materially from those expressed or implied in such forward-looking statements. This report should be read in conjunction with the financial statements included herein and the notes thereto. The Company does not undertake to update these statements.