Voltaire Leasing & Finance Ltd Management Discussions

ANNUAL OVERVIEW AND OUTLOOK

Change is happening against quite a challenging economic backdrop. 2025 will not be a year of rapid GDP growth: U.S. growth is forecast at a modest 2.0%, with the Eurozone lagging some way behind (0.9%) and Chinese growth (4.2%) well below recent historical averages. Inflation could also prove tenacious, due to higher fiscal spending and possible tariff hikes. This, in turn, will give central banks less room to cut interest rates as they seek to balance growth and inflation control. The result may well be uncertain and shifting market expectations, triggering more bouts of volatility than in 2024. Geopolitical fallout, perhaps due to changing trade policy, could add to the uncertainty.

For the global economy, we think 2025 will be a case of staying the course in turbulent times. The ability of individual economies to weather possible geopolitical and policy challenges next year will be determined by a number of factors. But, as the growth numbers highlighted above show, there is already a distinction between a high technology, higher productivity U.S. economy and a European economy that is lagging behind on the interlinked issues of productivity and investment.

The market focus on stocks should not preclude interest in other asset classes in 2025. Corporate bonds in the U.S., Asia and Europe, for example, are likely to remain interesting for investors for several reasons. These include institutional demand, still high yields and the return of the (term) premium. Supply and demand will remain fundamental to commodities such as oil and industrial metals but we also see other factors maintaining a relatively high price for gold in 2025. In alternative assets, we focus in this outlook on infrastructure - central to investing in future growth - and what we call the public and private mixology of investing in this area. FX considerations will, as always, be a central consideration for investors and here 2025 will clearly be a case of strong economy, strong currency for the U.S. dollar. The euro will look weak in comparison, but rate rises and growth could support the Japanese yen.

2025 will not always be an easy year for investors as markets navigate through geopolitical or other risks (including the three Rs of recession, rates and rotations). But we believe that these risks are manageable. With markets already anticipating the impact of future economic growth and development, this means that being and staying invested will be essential for portfolio success both in the short and long term. I hope you find the analysis in this annual outlook useful and we are, of course, always here to guide you through 2025 and beyond.

INDUSTRY OVERVIEW

The India Capital Market Exchange Ecosystem Industry is expected to register a CAGR of greater than 9% during the forecast period.

Indias economy has experienced unprecedented growth in the decades since liberalization. A strong capital market has primarily driven this growth, technological advances, and a more robust legal framework.

India has overtaken China as the worlds fifth largest and fastest-growing economy despite worries about recessionary conditions in other major economies. Factors such as a solid domestic economy, robust corporate earnings growth, and attractive stock valuations are expected to make the Indian market bullish in the current year, which is supported by buoyant domestic consumption and higher government spending. In addition to technology, financials, and consumer staples, emerging industries such as battery storage, green hydrogen, biotechnology, AVGC, and semiconductor manufacturing are expected to grow.

Financial inclusion programs, easy-to-use trading apps, lower KYC requirements, and increased risk-taking among millennials are why retail investors are increasingly investing in stock markets. Major success drivers are strong consumption demand, a strong government capex push, rapid digitization, and supportive policies. Indias capital market is highly dynamic and regulated. The market dynamics are affected by various factors, including global economic trends, geopolitical developments, and rapid technological advancements. However, India remains the top destination for foreign capital inflows among emerging markets. The fear of a US recession should bring more foreign capital inflows and cross-border investment into the Indian stock exchanges.

The main stock exchanges in India are the National Stock Exchange NSE and the Bombay Stock Exchange BSE. These platforms make it easier for domestic and international companies to trade stock, derivatives, bonds or other financial instruments. Overseeing these markets is the Securities and Exchange Board of India (SEBI), the countrys key regulatory authority. SEBIs role encompasses policy formulation, regulation enforcement, and safeguarding investor interests. The NSE and BSE host a diverse array of listings, spanning public sector enterprises (PSEs), private firms, and multinational corporations. These entities often raise capital through avenues like initial public offerings (IPOs) and subsequent equity issuances, channelling the funds towards business expansion, projects, and operations. Indias capital markets draw participation from various investor segments, including retail investors, institutional players like mutual funds, insurance firms, pension funds, and foreign institutional investors (FIIs). Notably, the stock market has witnessed a surge in retail investor engagement, buoyed by initiatives like dematerialization of securities and electronic trading platforms.

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

Voltaire Leasing & Finance Limited (VLFL) has exposures in various line of business. VLFL 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. GCM 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 except delay in complying with the provisions of SEBI LODR Regulations, 2015. No penalties/strictures were imposed on the Company SEBI or any other statutory authority on any matter related to capital market during the last three years.