First Fintec Ltd Management Discussions

Corporate Overview

First Fintec Limited (the Company) has been a promising company in the IT/ITES, KPO, ed-Tech and Fintech areas. Your Company now has over 24 years of outstanding journey in the Indian IT industry.

Your Company has adopted Indian Accounting Standard (Ind AS) noti ed under Companies (Indian Accounting Standard) Rules 2015 and accordingly the Standalone & Consolidated Financial Statements have been prepared in accordance with Ind AS prescribed under Section 133 of the Companies Act, 2013 read with the Rules made there under.

The Financial statements are prepared in accordance with accounting principles generally accepted in India, including the Accounting Standards noti ed under the Companies Act, 2013 ("the Act") read with Section 133 of the Companies Act, 2013.

At First Fintec, technological and human innovation transform nancial lives. Customer needs are at the heart of our business. We want to help customers manage their resources in a more logical, individualized way through ntec. In doing so, we are establishing a culture of re ection at the workplace.

In order to better represent our clients and customer communities, our company aims to be more diverse, inclusive, and accessible. First Fintec has adapted changes to its business verticals with the changing time.

Global Economic Review:

The global economy appears to be on track for a slow yet steady recovery from COVID-induced challenges and the Russia-Ukraine war. Global economic output is likely to grow gradually, owing to a stabilising in ation trajectory that is reviving consumer sentiment and investor con dence. Emerging market and developing economies (EMDEs) are also witnessing growth across multiple sectors, fuelled by government expenditures in infrastructure and manufacturing sectors.

The global economy is anticipated to rebound synchronously in 2025, as major election uncertainties are resolved, and Western central banks possibly implement rate cuts as in ation concerns subside. India is likely to experience improved capital ows, boosting private investment and exports. In ation concerns remain, but we expect them to ease in the latter half of the next scal year, barring any surprises from rising oil or food prices.

Outlook

Despite mounting in ationary pressures, the global economy is buoyed by a strong labour market, higher domestic spending, an in ux of foreign capital and a prudent response to the energy crisis in Europe. Many EMDEs have already recovered, which has bolstered real incomes. An optimistic global outlook would also be determined by the pace and e ectiveness of scal and monetary policy actions implemented to boost economic expansion. Going forward, the governments and central banks of the world are expected accelerate economic growth through targeted, need- based measures.

Indian Economy :

Overview:

India took a big economic leap this leap year: The country ended scal year 2024 to 2025 with a big bang, surpassing all market estimates of GDP, with 6.50% year-over-year (YoY) growth. For three consecutive years, Indias economy has exceeded growth expectations despite global uncertainties, driven by strong domestic demand and continuous government e orts toward reforms and capital expenditure.

To foster economic growth, the Indian government has rolled out several initiatives, such as the PM Gati Shakti (National Master Plan), the National Monetisation Plan (NMP) and the Production Linked Incentive (PLI) plan. Moreover, with declining in ation, rising disposable incomes and continued investment in infrastructure development, economic growth is anticipated in the future

Outlook

Strong credit growth, stable nancial markets and the governments greater focus on infrastructure and capex are expected to crowd in substantial investments. Although the global economic outlook is challenging, the fact that the Government of India and the Reserve Bank of India have been able to safeguard the Indian economy from an impending global recession underscores Indias robust economic fundamentals. India is showing signs of recovery, and pent-up demand during the last two years o ers hope for new growth opportunities in the domestic market.

Market Size of Fintec

Financial technology is one of the most widespread terms used for research in the nance industry in present time. Financial Technology (FinTec) is the use of modern innovative technology in the eld of nance. It is basically used for innovative and disruptive technology for providing nancial services. Fintech catered to the need of more security for the investors by providing innovative and secure nancial services. The other reason for the emergence of Fintech could be attributed to the need for nancial services at a more a ordable cost which provides mobility and faster pace. Owing to these factors in acceptance, ntech domain is gaining huge importance on a global market.

The India Fintech Market was valued at USD 121.4 billion in 2024, and is expected to reach USD 550.9 billion by 2033, growing at a CAGR of 17.40% during the forecast period (2024-2033). The Global Fintech Market size is expected to reach USD 332.5 Billion by the year 2028 and is expected to grow exhibiting a Compound Annual Growth Rate (CAGR) of 19.8% during the forecast period.

The Indian ntech industry has shown massive growth over the past few years. India is gradually becoming a hub for many Fintech startups. The prominent names in the list are Paytm, Pine Labs, PayU, and Faircent. SoftBank has been actively investing in many potential ntech startups. Government initiatives toward promoting the digitization of nancial systems and a cashless economy have helped shift consumer focus toward digital alternatives for nancial transactions and services.

Market Size of Edtec

The India edtech market size was valued at $2.80 billion in 2024. The Indian edtech market recorded strong growth in 2023 due to the rise in internet penetration and digital literacy. Several factors such as the availability of reasonably priced online education, increased technology adoption via the use of mobile devices, availability of high-speed internet, and exible learning modules have in uenced growth in the market. Going forward, the market will grow at a CAGR of more than 28.7% during 2025-2033.

Business Verticals as Opportunities at First Fintec

Fintec: Fintec is the new marriage of nancial services and information technology. However, this inter linkage is evolving through Investec, and SPAC at First Fintec.

Analytics: Analyzing data, using statistical models, and other quantitative methods is the essence of business analytics (BA). A structured, iterative analysis of data from an organization, with an emphasis on statistical analysis, is necessary to inform decision-making. At First Fin Research Analytics, we do business analytics for decision making of businesses and institutional segments.

Edtec: Our Edtech has impressive digital or e-learning product suits for the K-10 segment for CBSE (English Medium) and Maharashtra, Telangana, & Andhra Pradesh State Board education curriculums in English and Vernacular Mediums. Learning is made easy for students through digital o erings.

First Fintec has the following array of business portfolio

Invest Tec

Invest Tec is an independent investment division focused on Venture Capital and Private Equity Advisory. The rms team has over 21 years of experience in mergers, acquisitions, fundraising transactions, and investing and managing companies.

The Company founded it invest tec division in 2021 with a focus on M&A, strategic investment advisory, and capitalization transactions for Indian companies. Its main goal is to create unique solutions that generate value for all stakeholders of the advised companies.

Invest Tecs work is based on the deep understanding of the companies and create invest platform in and the support for the development of the companies with active participation in the creation of the growth strategy, evaluation of opportunities, and support to nancial planning, combining such actions with fundraising or merger and acquisition transactions.

We pride ourselves on our client companies close work and relationship and the long-term approach to our strategic advisory process. We also actively participate and devise treasury investment strategies.

Fin Research Analytics

We are an independent research provider o ering extensive industrial and nancial research covering various sectors, businesses, and companies.

Our team is known for its unbiased and authentic research. Our team consists of highly quali ed, well-experienced, and e cient research analysts who have been associated with us for a long time and tracking the equity markets in a very e cient and unbiased manner. Based on their research, most of our research analysts who have shown outstanding performance either as stock pickers and/or earnings estimators based on their research have recognition in the Thomson Reuters StarMine Analyst Awards for India for 2013, 2014, and 2015.

It is a matter of pride to mention here that many of the leading content aggregators like Thomson Reuters, Bloomberg, Sify nance, Capital IQ, Markets.com, ISI Emerging Markets Euro money Group, Value Notes, Money Control, Research Bytes, and myiris.com are our valued content users. Our customers are all top-notch institutions that are leaders in their respective industries.

Fintec SPAC

Special purpose acquisition company (SPAC) transactions may be considered as a capital-raising alternative to initial public o erings (IPO). SPAC transactions result in the private operating Company (Target) becoming a public company. As a result, SPAC transactions require Target to devote substantial time and resources to technical accounting and reporting matters and other De-SPAC considerations.

Although SPACs have been used for decades as alternative investment vehicles, they have recently come into vogue as seasoned investors and management teams have turned to SPACs to mitigate the increased market volatility risk of traditional IPOs. As a result, 2020-21 has been a record-breaking year for SPAC IPOs. This surge has been driven by the in ux of high-pro le investors and management teams entering the SPAC space, coupled with an abundance of uninvested capital that had been mainly sitting out the rst half of 2020.

SPAC risks

SPAC transactions come with their unique challenges. As a result, entities need to have (1) an understanding of the risks associated with these investment vehicles and (2) a comprehensive project management plan to meet the demands of an accelerated merger timeline.

Recent market volatility, combined with the arrival of seasoned sponsors and management teams, has created a modern-day SPAC revolution. In addition, the abundance of funds held in trusts and the increased appetite for private investment in public equity (PIPE) transactions have thrust SPACs beyond the fringe of capital markets and into the mainstream as signi cant players for potential sponsors, investors, and target operating companies.

We also undertake projects in IT/ITES applications relating to Fintec as an o ering.

Our Future O erings

Our future o erings include Fintec relating to regtech, realtec, cloud platform, p to P Platform technologies, etc.

SWOT Analysis:

The term Fintech probably has not escaped you. It has emerged as the new disruptive market force and is challenging the traditional means of providing nancial services.

The overall estimation of the FinTech market in 2021 for India has come out to be $50 billion as mentioned in a report by FIA Global. In 2024, India ranked third globally in FinTech sector funding.

But what exactly is Fintech? Simply put, Fintech stands for Financial Technologies. It refers to technological innovation in the nancial sector, including anything and everything in nancial services in terms of value addition and ease of use.

A short SWOT Analysis below highlights the many advantages and challenges of these new and emerging technologies (Fintech, Commonwealth, 2018). Strengths

The advantages of Fintech are manifold. By making the interaction between consumers and nancial services as well as between nancial service providers easier and simpler, Fintech o ers signi cant potential to enhance e ciencies, reduce costs, modernise nancial infrastructure, enable more e ective risk management and expand access to nancial services across a range of di erent areas including lending, payments, personal nance, money transfer, and insurance (Fintech, Commonwealth, 2018).

Weaknesses

The privacy of personal information provided by consumers online is under the spotlight these days. The recent data breach at Facebook is a case in point. This issue is particularly relevant for the Fintech sector as is the risk of fraud or nancial risks associated with consumers not fully understanding the new nancial products (Fintech, Commonwealth, 2018).

Opportunities

The de-risking phenomenon has become an existential threat to many small states in the Commonwealth, especially in the Caribbean and the Paci c. Fintech could potentially o er solutions to some of the key drivers of de-risking such as Know Your Customer policy or eliminate the need for corresponding banking relationships altogether.

The declining cost of internet services and growing mobile and smartphone penetration in small and developing countries also provide an excellent opportunity to leverage Fintech to promote nancial inclusion amongst the estimated two billion people who remain without access to formal nancial services. Kenyas M-Pesa is one commonly cited example.

While many Central Banks are actively promoting Fintech through sandbox approaches, the existing regulatory barriers are helping banks to maintain the status quo. The Fintech and the traditional banking sector, however, need not always compete but can also complement and learn from each other, forging new partnerships for the e cient delivery of nancial services (Fintech, Commonwealth, 2018).

Threats

Cybercrime can potentially undermine the integrity of the entire nancial system. This is perhaps the main reason why some Central Banks are reluctant to embrace Fintech more broadly. In the Commonwealth, many small and developing countries lack the capacity and infrastructure to safeguard cybersecurity. There are also concerns that many Fintech start-ups are too focussed on launching their product quickly, without paying due attention to security measures.

Then, there is a potential abuse of Fintech. Without proper regulation, easy access to nance can encourage risky behaviours like excessive borrowing and high personal debt accumulation. There is also some legitimate concern about market competition. A few early entrants in the market can get too large too soon and can wield considerable monopolistic power. On the other hand, too many entrants providing similar services can also crowd the market and make supervision more di cult. This is especially true for many small and developing countries where the rise of the sector can stretch already limited regulatory and supervisory capacity.

We do not think that Fintech is just a buzzword, rather it is here to stay. The wide range of technologies and their possible use under the Fintech umbrella means that all countries can bene t from the technological innovations in nancial services in a way that suits their needs. This can lead to more sustainable growth by enhancing productivity and creating new markets and jobs. The main challenge is striking the right balance between regulation and promotion of this rising sector (Fintech, Commonwealth, 2018).

First Fintecs Key Strengths are

Strong local and international presence Uniquely quali ed and complementary team Focus and experience in the industry sectors Entrepreneurial experience Financial and M&A capabilities Strong and active investor base

THREATS & RISKS

Part i: External Risks relating to the Business of the Company:

1. Changes in Government policies could adversely a ect the Companys business, results of operations and nancial condition.

2. A decline in Indias foreign exchange reserves may a ect liquidity and interest rates in the Indian economy, which could have an adverse impact on the Company. A rapid decrease in reserves would also create a risk of higher interest rates and a consequent slowdown in growth.

3. If in ation were to rise in India, the Company might not be able to increase the prices of its services and products in order to pass costs on to its customers and the Companys pro ts might decline.

4. A signi cant change in the Central and State Governments economic liberalization and deregulation policies could disrupt the Companys business.

5. If regional hostilities, terrorist attacks or social unrest in India increase, the Companys business could be adversely a ected, and the price of the Shares could decrease.

6. A slowdown in economic growth in India could cause the Companys business to su er

7. Natural calamities could have a negative impact on the Indian economy and could cause the Companys business to su er and the price of the Shares to decrease.

8. Covid -19 leading to continuous lock down and non- committal of clients due to schools being shut.

Part ii : Risks Associated with the Expansion of the Companys Business

1. The Company faces risks and uncertainties associated with the implementation of its expansion projects.

The Company plans to expand its brand and product portfolios and its service and distribution networks in India and abroad in the near future, both organically and inorganically via strategic acquisitions. In taking these and any other such expansion initiatives, the Company faces risks and uncertainties, including funding anticipated to be deployed towards the cost of the project will not become available in a timely manner or at all.

2. The company has various education modules, to sell them the company requires specialized marketing force which also needs huge expenditure, paucity of funds may delay aggressive marketing of its e-learning products.

3. IT/ITES, Education and Healthcare services have become very competitive, and margins are under pressure due to varied kinds of assignments.

4. E-learning o erings are subject to syllabus changes from time to time.

Risks and Risk Mitigation

The IT Industry thrives under a dynamically changing and highly competitive business environment. The Company too faces several business risks, of which some prominent ones are discussed hereunder alongside the risk mitigation approach followed by the Company:

Concentration risks

The Company has taken signi cant steps to ensure that it does not become too dependent on a few clients or any particular geography.

Considerable e orts are being made to generate business from new geographies.

Investment portfolio related risks

In order to deal with surplus cash, the Company, as a policy, does not prefer to invest in high-risk assets such as equities and low liquidity assets like real estate etc. The primary area of risk for the Companys market exposure is related to its investment in securities. To mitigate risk, surplus funds, if any, are invested in appropriate avenues upon a review by the investment committee. All investment decisions are driven by certain guiding principles like safety of investments, liquidity and returns.

Employee-related risks

Attrition: Human Resource functions and initiatives of the Company are driven by a strong set of values and policies. The Company has maintained a competitive, healthy, and harmonious work environment at all levels. The Company has taken new initiatives to strengthen its recruitment processes, values and vision programs, leadership, and performance management programmes to retain the best talent.

Constraints in availability of skilled resources

The Company o ers a competitive salary constantly benchmarked by the market, world class infrastructure, excellent work culture, high class training and career development and long-term growth prospects, to remain an employer of choice. The Companys development centers are in cities which have good availability of skilled manpower.

Competition-related risk

Indian IT services market remains a very competitive space. The Company is facing competition from large Indian IT vendors and global vendors which are increasing their India presence by setting up o shore delivery centers.

The Company is managed by locally recruited professionals and talents across all geographies. They have established strong interaction with various analyst rms worldwide through participation in IT conferences and industry speci c events attended by ClOs and executives of major corporations. The sales & marketing and delivery infrastructure of the Company is world class. This helps the Company to maintain its competitive edge over other players.

Exchange rate risk: Hedge Accounting

The company has policies and measures in place to mitigate Exchange rate risk.

Geo-political risks

The ability of Indian IT services companies to secure o shore projects from client organisations abroad is often subject to threat perceptions as regards the Indian subcontinent. Current civil situations in neighboring countries of India may have negative implications for the operations of the Company. To mitigate these risks and to ensure continued delivery of services to clients irrespective of any geo-political disturbances, the Company has been taking appropriate measures in respect of disaster recovery and business continuity, at di erent locations.

Internal Control Systems And Their Adequacy

The Company has a well-de ned and documented internal audit & control system, which is adequately monitored. Checks & balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. The Internal control systems are improved and modi ed continuously to meet the changes in business conditions, statutory and accounting requirements. Your Company has an Audit Committee consisting of three Directors of whom all are Non-Executive and two are independent Directors. The Audit Committee of the Board of Directors and Statutory Auditors are periodically apprised of the internal audit ndings and corrective actions taken. The Audit Committee of the Board of Directors reviews the adequacy and e ectiveness of internal control system and suggests improvements if any for strengthening them.