Mahindra & Mahindra Financial Services Ltd Management Discussions

Mahindra & Mahindra Financial Services Limited

– An overview

Mahindra & Mahindra Financial Services Limited (Mahindra Finance/MMFSL) is a subsidiary of the Mahindra Groups flagship company Mahindra & Mahindra Ltd. (M&M) (market capitalisation: Rs3.44 trillion as on 21^st April 2025), one of Indias leading business conglomerates.

MMFSL is a leading upper layer deposit taking non-banking finance company (NBFC) that provides a range of financial products and services to borrowers in

Emerging India.

Our Company is a formidable player in the financing of new and pre-owned automotive vehicles, tractors and commercial vehicles. The vision of MMFSL is to be a "Leading and responsible financial solutions partner of choice for Emerging India".

Our new businesses include MSME lending and leasing, and our strategic emphasis is on the rural and semi-urban markets. We have had the opportunity to serve over 11 million customers since inception, relying on our extensive network spread across 1,365 offices covering 27 states and 7 union territories in India. Our ‘AAA credit rating is a sign of the inherent strength of our robust financial position and parentage.

Economy Overview Global Economy

Theglobal economy in 2024 exhibited both progress and emerging challenges. Inflation eased from multidecade highs but showed uneven trends, with core goods inflation seeing an uptick late in the year and services inflation being on a downward trend. Labour markets stabilised, as unemployment returned to pre-pandemic levels. Trade dynamics faced disruptions from widespread U.S. tariffs, which triggered historic equity market corrections, spikes in bond yields and amplified policy uncertainty. Trade activity, particularly driven by heightened Chinese exports and U.S. imports, showcased the capacity of economies to pivot effectively amid evolving policy landscapes.

Geopolitical tensions remained heightened, posing risks to international monetary system. Primary commodity prices rose by 1.9% between August 2024 and March

2025, driven by increases in natural gas, precious metals, and beverage prices. Conversely, oil prices declined due to concerns over reduced global demand from trade tensions, alongside robust production growth outside

OPEC+ and the gradual reversal of OPEC+ supply cuts. The global economic environment is thus poised for significant shifts in 2025, driven by evolving market dynamics, geopolitical realignments and structural transformations across industries.

Global growth forecast (%)

Particulars	2024	2025	2026
		(P)	(P)
World	3.3	2.8	3.0
Advanced Economies	1.8	1.4	1.5
- United States	2.8	1.8	1.7
- Euro Area	0.9	0.8	1.2
Emerging Markets & Developing Economies	4.3	3.7	3.9
- China	5.0	4.0	4.0
- India	6.5	6.2	6.3

Source: International Monetary Fund April 2025 report

Outlook

The global economy faces increasing headwinds in 2025, with growth expected to moderate to 2.8%. Trade tensions continue to weigh on investment sentiment, while widespread tariffs amplify inflationary pressures. Advanced economies are anticipated to experience slower growth due to subdued consumption and fiscal constraints. Emerging markets are likely to see uneven progress, with domestic vulnerabilities and structural challenges hampering recovery in some regions, particularly in Asia.

Inflation is anticipated to decline gradually; however, risks persist due to supply chain disruptions and volatile commodity prices. Faster progress on disinflation and stronger demand in key economies could result in greater-than-expected global activity. While uncertainties surrounding trade policies and inflation persist, proactive fiscal measures and international collaboration are expected to mitigate risks. By leveraging innovation, strategic investments, and policy realignments, the global economy remains well positioned to sustain growth and unlock new opportunities.

Indian Economy

TheIndian economy demonstrated resilience amidst global uncertainties during FY2025, supported by robust domestic growth drivers and sound macroeconomic fundamentals. Despite external headwinds from escalating trade tensions and a weakening global outlook, India continues to be one of the fastest-growing major economy. Key sectors such as agriculture benefited from favourable monsoon, higher summer sowing acreage, and strong rabi and kharif harvests, ensuring food security and stable rural incomes. Industrial and services activities remained buoyant, with manufacturing PMI reaching an eight-month high in March 2025, driven by increased new orders and output. Inflation moderated significantly, with headline CPI inflation declining to a 67-month low of 3.3% in March 2025, primarily due to easing food prices. The financial sector remained stable, supported by proactive liquidity measures by the Reserve Bank of India. These developments underscore Indias strong macroeconomic fundamentals and its ability to navigate global uncertainties effectively.

Outlook

With a robust demographic dividend, accelerating digital transformation, and a strong reform-driven policy framework, the Indian economy stands poised to emerge as a global powerhouse. The agricultural sector is expected to maintain its momentum, supported by bumper harvests and favourable reservoir levels, though potential risks from heatwaves warrant close monitoring. Industrial activity is anticipated to gain further traction, driven by increased manufacturing capacity utilisation, higher private sector investments, and government initiatives under the Production

Linked Incentive (PLI) scheme. The services sector is likely to remain a key contributor, fuelled by strong demand in technology, fintech, and infrastructure services. Inflationary pressures are expected to remain manageable, supported by stable commodity prices and proactive monetary interventions. Going forward, India is expected to benefit from supply chain realignments and engagement with global investors seeking stability and scale, given its already established trade linkages. India is not only shaping its growth story but also playing a pivotal role in the future of the world economy. The path forward for the Indian economy is brimming with opportunity, fuelled by ambition and committed to inclusive progress.

Macro-Economic Snapshot India

Particulars	FY2018	FY2019	FY2020	FY2021	FY2022	FY2023	FY2024	FY2025
Real GDP growth (%)	6.8	6.5	3.9	(5.8)	9.7	7.0	7.6	6.5
CPI inflation (%)	3.6	3.4	4.8	6.2	5.5	6.7	5.1	4.6
WPI inflation (%)	2.9	4.3	1.7	1.3	13.0	9.4	0.4	2.3
Merchandise exports (%)	10.3	9.1	(5.0)	(7.5)	44.8	6.3	(3.7)	0.1
Merchandise imports (%)	19.5	10.3	(7.6)	(16.6)	55.3	16.6	(5.5)	6.2
Current account balance (% of GDP)	(1.8)	(2.1)	(0.9)	0.9	(1.2)	(2.0)	(1.0)	(1.1)*
Exchange rate (Rs/$ - avg.)	64.5	69.9	70.9	74.2	74.5	80.4	82.8	84.5
10-year yield (% - March-end)	7.3	7.5	6.9	6.3	6.8	7.3	7.1	6.6

Source - Department of Economic Affairs, RBI * Current account balance as of Q3 FY2025

Industry Overview

Indian Financial Services Industry Overview

FY2025 witnessed robust growth in Indias financial sectors, marked by improved banking metrics, significant financial inclusion, thriving capital markets, and strong macroeconomic fundamentals.

- Indias monetary and financial sectors displayed resilience and stability, fostering inclusive growth and economic development with 6.5% GDP growth in FY2025.

- Banking sector performance grew steadily with credit growth aligning with deposit growth, while scheduled commercial banks improved profitability, evidenced by declining gross non-performing assets and a higher capital-to-risk weighted asset ratio.

- RBIs Financial Inclusion Index rose significantly from 53.9 in March 2021 to 64.2 in March 2024, driven by government-backed infrastructure financing.

- Indian stock markets reached new highs by Dec

2024, outperforming other emerging markets despite global uncertainties. Market growth was fuelled by strong macroeconomic fundamentals, healthy corporate earnings, supportive institutional investment and robust SIP inflows (35% up YoY).

Outlook

Indias financial sector has demonstrated midst challenging geopolitical conditions, showcasing robust performance across banking, capital markets, insurance, and pensions. System liquidity remains in surplus, while banks exhibit strong financial health, evidenced by narrowing credit-deposit growth gaps and improved profitability. The financial sector is undergoing a transformation, characterised by rising consumer credit, increased non-bank financing, and the surging popularity of equity-based financing. These trends signify diversification and innovation in financial services but also pose incremental regulatory challenges. The expansion of consumer debt, unsecured lending, and the influx of young investors into equity markets highlight the need for balanced growth and stability in the sector. While these developments mark a new era for Indias financial landscape, they require careful oversight to ensure stability and sustainability amidst rapid change.

Indian NBFC Industry

India, as one of the fastest growing and largest economies globally, presents a conducive environment for the expansion of its credit market. The total NBFC credit outstanding stood at approximately Rs 52 trillion as of December 2024 and is projected to cross Rs 60 trillion by FY2026, reflecting the sectors continued expansion. Amongst banks, NBFC and All India Financial Institutions, NBFCs have maintained 21-24% share of credit from FY2017 to FY2024. As India targets becoming a $5 trillion economy in the coming years, the demand for financing is set to increase, underscoring the vital role of NBFCs in supporting economic growth and development.

Retail loans, which accounted for 58% of total NBFC credit in December 2024, remain the cornerstone of growth. Unsecured business loans accounted for 28% of retail NBFC credit in December 2024. Earlier, RBI had raised risk weights by 25 bps to 125% on unsecured retail loans, due to its indiscriminate growth, especially in personal loans and credit cards. Asset segments such as microfinance, personal loans, credit cards and unsecured business loans witnessed higher stress in FY2025, leading to higher delinquencies and write-offs.

Over the years, NBFCs have significantly strengthened their balance sheets, marked by reduced leverage and improved asset quality, with a notable shift towards the retail segment. NBFCs are effectively utilising digital data to improve credit assessments and operational efficiency. The interest of equity investors remains strong and there is vast pool of debt capital overseas which is largely untapped. With such a stable foundation, the sector remains well-positioned to navigate the evolving regulatory environment while maintaining momentum.

Growth Drivers for the Indian NBFC Industry

1. Digital Transformation and Technological

Advancements

NBFCs are increasingly leveraging digital technologies to enhance operational manage fraud, and improve customer engagement. The adoption of super apps, digital sourcing platforms, and strategic partnerships with fintech firms is driving innovation and reshaping the lending landscape.

2. Focus on Key Segments i. Retail Loans: The retail lending sector remains a key driver of growth, with strong demand for home loans, vehicle financing, and personal loans. Favourable demographic trends, rapid urbanisation, and rising disposable income are further driving growth in this segment. ii. Micro, Small and Medium Enterprises (MSME) Financing: Thestrength of the MSME sector presents significant opportunities for NBFCs, particularly through tailored financial solutions such as factoring, supply chain financing, and unsecured business loans.

3. Financial Inclusion

India has made significant progress in financial inclusion, with a total of 55.1 crore beneficiaries under the Pradhan Mantri Jan Dhan Yojana (PMJDY) Scheme as of March 2025. NBFCs play a crucial role in bridging the credit gap for underserved and unbanked populations. By leveraging technology and customised product offerings, they are driving financial inclusion across rural and remote regions, ensuring wider access to credit and banking services.

4. Sustainability and EV Financing

The Governments push for eco-friendly projects, including solar energy, waste management, and sustainable infrastructure, has opened new avenues for NBFCs in green financing and impact investing.

With the rapid adoption of electric vehicles in India,

NBFCs are capitalising on emerging opportunities in green finance.

5. Healthy Asset Quality Levels

While concerns persist over rising household indebtedness and asset quality risks in unsecured lending (such as personal loans and microfinance), NBFCs that prioritise proactive risk management, digital credit monitoring, and diversified lending portfolios are better positioned to maintain financial stability and portfolio health.

Key Regulatory Developments in the NBFC Industry

1. Harmonising Housing Finance Companies (HFCs) Directions: The Reserve Bank of India (RBI) has introduced revised regulations for HFCs and efficiency, NBFCs to align the HFC Master Directions with the Scale-Based Regulation (SBR) framework. Effective from 1^st January 2025, these amendments aim to eliminate regulatory inconsistencies and ensure a standardised regulatory structure across financial entities.

2. Scale-Based Regulation (SBR): The RBI continued to implement and strengthen its four-tier classification for NBFCs Base, Middle, Upper and Top Layer - based on their asset size, systemic importance and business operations in FY2025.

This framework aimed to mitigate regulatory arbitrage, strengthen financial stability and ensure that NBFCs are subject to appropriate levels of supervision and compliance requirements.

3. Bank Credit to NBFCs: Risk weights for bank credit to NBFCs were restored, aligning them with the external rating as prescribed under RBI Basel III capital regulations. RBI cut the risk weights of bank loans to NBFCs by 25 bps depending on the ratings.

4. Guidance Note on Operational Risk Management & Operational Resilience: On 30^th April 2024, the

Reserve Bank of India (RBI) released an updated Guidance Note on Operational Risk Management and Operational Resilience. The guidelines brings the Basel Committee on Banking Supervision (BCBS) Principles and international best practices into line with RBI rules.

5. Budgetary Reforms in the Indian Financial Services Industry: The Union Budget for FY2026 introduced several key reforms aimed at enhancing investment, improving financial accessibility and streamlining regulations to promote economic growth. The major highlights include:

- FDI in Insurance Sector: The FDI limit in the insurance sector is raised from 74% to 100% for companies that reinvest the entire premium within India.

- Credit Enhancement Facility by National Bank for Financing Infrastructure and Development (NaBFID): A Partial Credit Enhancement Facility will be established by NaBFID to support corporate bonds for infrastructure financing.

- Grameen Credit Score: Public Sector Banks will develop a ‘Grameen Credit Score framework to improve credit access for Self-Help Group (SHG) members and rural communities.

- Tax Relief & Vehicle Demand: The new tax regime exempts incomes up to Rs12 lakh, increasing disposable income, and may potentially boost demand for passenger cars, two-wheelers and three-wheelers.

- Boosting Auto & EV Financing Through Policy Reforms: The GovernmentsRs 7,000 crore+ allocation across Auto PLI, PM E-Drive, ACC PLI and PM e-Bus Sewa schemes is set to drive vehicle demand, creating opportunities for auto financing. The removal of customs duties on 35 key EV battery components will reduce production costs, making EVs more affordable and increasing financing prospects in the segment. The Dhan-Dhaanya Krishi Yojana, is expected to support 1.7 crore farmers to enhance agricultural productivity, improve irrigation facilities and facilitate long-term and short-term credit.

These egulatory initiatives aim to fortify the NBFC sector by enhancing financial stability, encouraging responsible lending practices and ensuring that digital advancements align with consumer protection and financial inclusion goals.

Outlook

Indias NBFC sector is poised for sustained growth, supported by a thriving economy, robust balance sheets, and diverse portfolio offerings. Its resilience, adaptability, and niche focus on last-mile credit delivery remain key strengths, enabling it to drive significant to Indias economic development. With healthy liquidity and stronger balance sheets, the sector is well-positioned to meet rising retail credit demand. Indias

GDP, projected to grow at an average of 6.7% between FY2025 and FY2031, will offer additional tailwinds to the sectors growth trajectory.

RBIs push for regulatory alignment with banks is prompting larger NBFCs to enhance governance and risk management practices, boosting sectoral stability. Digital adoption is enabling better outreach, customer onboarding, and credit assessment, particularly in underserved areas. However, challenges such as rising borrowing costs, fintech competition, and funding constraints for smaller NBFCs persist. With sound regulation, technological agility, and strong demand,

NBFCs remain critical to last-mile credit delivery.

Vehicle Financing Industry

Growth in the vehicle financing industry was driven by consistent demand across urban and rural markets.

This growth was underpinned by the Indian automobile industrys performance in FY2025, which sustained its momentum with a 7.3% rise in domestic sales, reflecting strong domestic demand and growing global interest in Indian-made vehicles. Passenger Vehicles

(PV) achieved a record sale of 4.3 million units with Utility Vehicles (UVs) leading the charge and accounting for 65% of PV sales. Two-Wheelers saw a healthy 9.1% growth to reach 19.6 million units, supported by rural recovery and increasing preference for scooters.

Three-Wheelers also posted their highest-ever sales at

0.7 million units, aided by rising demand for last-mile mobility solutions, especially in the passenger subsegment. While Commercial Vehicles (CV) experienced a marginal decline of 1.2%, the segment showed late-year recovery and posted strong export growth of

23.0%, supported by infrastructure expansion and fleet upgradation trends.

Electric vehicle (EV) adoption also saw a notable increase in FY2025, with total registrations rising 16.9% to 2.0 million units. Registration of all types of e-Three Wheelers grew by 10.5% in FY2025 as compared to FY2024, with registrations of close to seven lakh units. Government initiatives such as the Electric Mobility Promotion Scheme (EMPS), PM E-Drive and PM e-Sewa, along with new EV model launches, have played a crucial role in accelerating EV penetration.

Domestic Sales (in million units)

Category	FY2022	FY2023	FY2024	FY2025
Passenger vehicles	3.07	3.89	4.22	4.30
Commercial vehicles	0.72	0.96	0.97	0.96
Three-wheelers	0.26	0.49	0.69	0.74
Two-wheelers	13.57	15.86	17.97	19.61
Grand total	17.62	21.20	23.85	25.61

(Source: Society of Indian Automobiles Manufacturers)

Outlook

The automotive industry is expected to sustain its growth momentum in FY2026, driven by stable macroeconomic conditions, government initiatives, and infrastructure investments. A normal monsoon, reforms in personal income tax, and RBIs recent rate cuts are anticipated to boost demand, particularly in rural and semi-urban areas, while increasing accessibility to vehicle financing. New model launches & growing interest in electric vehicles are likely to further support growth in the industry. Vehicle finance AUM is projected to reach ~Rs9.4 lakh crore by March 2026, growing at a CAGR of 15-16% during FY2025 - FY2026. While financing norms and challenges such as tightened global trade uncertainties persist, strategic marketing and innovation in passenger vehicles could help address subdued consumer sentiment. Overall, the auto sector is poised for incremental growth, contingent on effective management of financing, inventory, and evolving global trade dynamics.

Small and Medium Enterprise (SME) Financing Industry

TheMicro, Small, and Medium Enterprises (MSME) sector remains key for Indias economic growth, contributing significantly to employment, manufacturing, and exports.

With over 5.9 crore registered MSMEs employing more than 25 crore individuals, the sector accounts for 45.8% of total exports as of FY2025. However, SMEs continued to face challenges in accessing formal credit, with a persistent financing gap limiting their ability to expand operations, invest in technology and sustain long-term growth. To bridge this gap, the Government introduced various initiatives aimed at improving credit access for SMEs. The Union Budget for FY2026 presents a comprehensive strategy to strengthen the MSME sector by enhancing credit access, supporting entrepreneurship and introducing sector-specific initiatives. It focusses on revised classification norms, improved credit guarantees and customised financial products, while continuing to empower MSMEs through key programmes such as Udyam Registration, Pradhan Mantri Vishwakarma Kaushal Samman (PM Vishwakarma), Prime Ministers

Employment Generation Programme (PMEGP) and the

Public Procurement Policy, along with new institutional and mission-based support.

Outlook

The outlook for the MSME sector in FY2026 remains optimistic, supported by sustained policy initiatives focused on digital transformation, export promotion, and sustainable development. Government efforts to integrate MSMEs into global value chains through trade agreements and manufacturing incentives are expected to gain momentum. The expansion of platforms like Udyam Assist and improved access to formal credit will further aid the formalisation of micro-enterprises. As India progresses toward a $5 trillion economy, MSMEs are projected to contribute over $2 trillion, playing a vital role in driving inclusive growth and economic expansion.

Housing Finance Industry Overview

The housing finance market is undergoing rapid expansion, driven by structural factors such as improved affordability, rising urbanisation, increasing nuclear families, premiumisation in housing demand, and government initiatives like Housing for All. Governments continued emphasis on affordable housing through initiatives like PMAY 2.0 (Pradhan Mantri Awas Yojana) is further bolstering the demand for housing finance. Affordable Housing Finance Companies (AHFCs) play a complementary role in expanding the reach of housing finance to underserved segments of the population, leveraging innovative products and digital platforms to cater to diverse customer needs.

Banks and housing finance companies (HFCs) are positioned to benefit from distinct market segments, with banks concentrating on high-ticket loans for salaried individuals in metropolitan and urban areas, while HFCs focus on smaller-ticket loans for self-employed borrowers in tier 2 and below cities using assessed income models. HFCs have maintained a stable market share of 18-19%, supported by their specialised offerings and extensive geographic reach. The sectors ability to attract equity investments stems from its secured lending practices, deeper penetration into affordable housing, and low credit costs. Additionally, reduced gearing levels following liquidity challenges in recent years have further bolstered the financial stability and capitalisation of housing finance institutions.

HFCs have witnessed a rebound in profitability metrics to pre-pandemic levels, driven by easing credit costs and improving margins. While HFCs have seen a healthy loan growth, challenges such as tighter liquidity, intensified competition, and cautious credit policies in riskier segment could pose risks to sustained growth in future.

Outlook

Favourable demographics, low mortgage penetration, rising per capita income and government push to affordable housing through PMAY-U scheme are expected to sustain the demand for housing loans for years to come.

The housing loan market is projected to experience robust growth over the medium term, with HFCs anticipated to maintain a healthy balance sheet. Gearing levels, which have moderated due to fundraising and enhanced accruals, are expected to rise as entities leverage their equity. The wholesale segment within the HFC portfolio is positioned for cautious expansion, contributing to a gradual increase in its share of the overall portfolio mix. Asset quality risks remain minimal, with gross non-performing assets projected to remain stable. Credit costs are anticipated to stay within a manageable range, supporting profitability. A favourable growth environment, coupled with stable credit costs and declining funding costs, is expected to sustain strong returns on assets for HFCs in the foreseeable future.

Mutual Funds Industry Overview

The Indian mutual fund industry in 2025 stands at a pivotal juncture, reflecting remarkable growth and transformation. As of March 2025, the industrys assets under management (AUM) have surged to Rs 65 trillion. Systematic Investment Plan (SIP) contributions have also witnessed exponential growth, reaching

Rs 25,900 crore monthly, underscoring the rising preference for disciplined investing. Despite these achievements, mutual fund penetration remains limited to approximately 3.6% of the population, highlighting significant untapped potential.

The industry is increasingly focussed on addressing challenges such as low financial literacy, limited accessibility in Tier-2 and Tier-3 cities, and the dominance of traditional savings instruments. Strategic interventions, including simplified vernacular communication, and innovative product offerings like passive funds and lifecycle-based schemes, are being implemented to broaden participation.

Outlook

Themutual fund industry is projected to align with global standards by 2047. The number of AMCs are expected to grow from 44 to 212. The retail-institutional AUM mix is expected to shift from 64:36 to 70:30, driven by sustained market returns and mutual fund penetration increasing from 3.6% to 15% of the population. Unique investors are projected to rise from 4.5 crore to 26 crore, with average retail AUM per retail investor reaching Rs74 lakh, reflecting deeper market participation and wealth creation. The mutual fund industry is poised to catalyse Indias wealth creation story as India becomes a nation where financial well-being is not just an aspiration but a widespread reality.

Insurance Industry Overview

Indias insurance industry is witnessing strong growth, driven by economic expansion, favourable demographics, digitalisation, and regulatory reforms. Life insurance is benefiting from rising awareness and digital adoption, while non-life segments like health and motor are expanding due to regulatory support. In FY2025, Indias life insurance industry recorded a 5.1% growth in new business premiums, reaching Rs3.97 lakh crore — a marked improvement over the 2% growth reported in the previous year. The New Business Premium (NBP) of private sector life insurance companies expanded 9.8% to Rs1.71 lakh crore in FY2025. The sector showed resilience despite market headwinds, driven by sustained demand for protection and long-term savings products. In FY2025, the non-life insurance industry crossed the Rs3 lakh crore premium milestone but recorded muted growth relative to previous years. y, with a continued focus on

Outlook

Insurance industry in India is expected to be the fastest-growing insurance market in the G20 over the next five years. The Insurance Regulatory and Development Authority of India (IRDAI) continues to promote digital transformation and customer-centric policies, which are expected to further streamline operations and improve customer engagement.

Thelife insurance sector is anticipated to benefit from increased demand for protection and savings products, especially among the younger population. In the non-life segment, health insurance is expected to grow, driven by rising healthcare costs and heightened health awareness. However, challenges such as climate change and environmental risks may impact underwriting practices and claims management.

Insurance brokers are poised to play a crucial role in this evolving landscape by offering personalised risk solutions and leveraging technology to enhance customer experience.

Business Review

Thebusiness environment has witnessed a stable growth with further strengthening of our position in the financing of passenger vehicles, pre-owned vehicles, and tractors. The disbursement ofRs 57,900 crore was the highest ever, an increase of 3% over the previous year. This helped our loan book to exceed Rs 1,19,000 crore. Our growth comes from expanding our scale in rural and semi-urban areas, while also building presence in the mass affluent customer segment in Emerging India. New business verticals like SME lending (including loans against property) and leasing are also being scaled up.

We consistently maintain our leadership positions in the financing segments for tractors and Mahindra Utility Vehicles (UVs). During this period, we have observed a further improvement in our disbursement across various manufacturers. We are actively collaborating with auto aggregators to generate leads within the used vehicle finance sector.

Quiklyz, a leasing solution launched in FY2022, continues to enhance its presence in the B2B segment and is expected to grow as rising demand for EVs is expected to boost the rental and leasing market.

Our Company is rated AAA across all major credit rating agencies, strength and consistent performance. The ratings help us to have a diversified funding profile and to borrow funds at the competitive cost.

Overall, we continue to focus on sustained momentum in disbursements, improving asset quality, and robust talent collection retention and technology initiatives.

Operational Overview

The key operational highlights for FY2025 are as follows:

- Total income increased by 19% to Rs16,075 crore, driven by asset and disbursement growth, compared to Rs13,562 crore in FY2024

- Disbursements grew by 3% year-on-year, reaching

Rs57,900 crore

- Business assets rose by 17% to Rs1,19,673 crore from Rs1,02,597 crore in FY2024

- Capital adequacy stood at 18.3%, with a debt-to-equity ratio of 5.70 and a liquidity buffer of approximately Rs10,400 crore

- The Provision Coverage Ratio (PCR) for Gross Stage-3 was maintained at 51.2% as of March 2025

- The customer base surpassed 11 million

- The employee count stood at 25,261 as of 31^st March 2025

SCOT Analysis

Strengths

- Leadership position in vehicle financing and a market leader in tractor financing

- Deep presence in rural and semi-urban markets, with strong customer insights and an understanding of livelihood needs serving customers through an extensive distribution network of 1,365 branches and offices

- Strong, long-term relationships with OEMs and channel partners

- Empowered local workforce, ensuring better customer engagement

- Diverse product range tailored to customer requirements

- Strong customer trust and brand recognition

- Agile operations with strong control functions across compliance, risk, audit, underwriting and collections

- Comfortable capitalisation and liquidity position

- Streamlined and robust processes to manage volatility and credit costs

- Customer servicing via multiple channels for customer convenience and quicker resolution our strong financial position, credit

Challenges

- Cost of borrowings remain elevated

- Limited presence beyond vehicle financing

- Slower adoption of digital and technology solutions

Opportunities

- Revenue opportunities through partnerships in non-lending financial services and co-lending ventures

- Emerging ecosystem partnerships and platform-based collaborations

- Growing middle class, with diverse financial needs

- Strengthening economy, increasing formalisation and increasing digital adoption

- Advanced analytics and AI for operating efficiencies

Threats

- Uncertainty in the global political landscape

- Intensifying competition from banks

- Potential slowdown in automotive sector

- Growing fraud risks impacts customer trust and operational efficiency

Financial Overview Financial Performance

The table below provides the Companys standalone financial summary for FY2025, covering revenues, expenses and profits.

(in Rs crore)

Particulars	For the year ended 31st March 2025	For the year ended 31st March 2024	Change (%)
Revenue from operations	16,018.95	13,407.03	19.5%
Other income	55.74	155.39	-64.1%
Total revenue	16,074.69	13,562.42	18.5%
Expenses
a. Employee benefits expenses	1,903.13	1,712.63	11.1%
b. Finance costs	7,898.30	6,426.94	22.9%
c. Depreciation, amortisation and impairment	273.42	228.71	19.5%
d. Impairment onfina ncial instruments	1,617.86	1,822.79	-11.2%
e. Other expenses	1,234.71	1,015.88	21.5%
Total expenses	12,927.42	11,206.95	15.4%
Profit before exceptional items and taxes	3,147.27	2,355.47	33.6%
Exceptional items (net) - income/(expense)	-	-
Profit before tax	3,147.27	2,355.47	33.6%
Tax expense	802.23	595.85	34.6%
Profit for the year	2,345.04	1,759.62	33.3%

Discussion on Financial Performance

Revenue from operations in FY2025 increased by

19.5% over the previous year, driven by higher average loan book. Disbursements grew by 3% YoY, resulting in closing loan book being higher by 16.6% over the previous year.

Net interest income grew by 14.6% over the previous year. Companys credit rating remained stable at AAA across all major credit rating agencies.

Net Interest Margin (Gross Spread) for the year stood at 6.5%, compared to 6.8% in FY2024. The elevated interest rate environment impacted Gross Spread throughout the year. Interest Income increased by 17.0% YoY in FY2025.

The cost-to-income ratio stood marginally higher at ancialyear,noneof

41.7% as compared to 41.4% in FY2024, as your

Company continues to invest in collection-related processes, upgrade IT infrastructure and talent acquisition. Operating expenses rose by 15.4% YoY, due to continued investments in future growth oriented areas and digital initiatives.

Profit before tax increased by 33.6% to Rs 3,147 crore from Rs 2,355 crore in F2024. Your Company continued to maintain a healthy provision coverage ratio (PCR) of 51.2% vis-a-vis 63.2% in FY2024 on stage-3 assets. Profit After Tax (PAT) stood at Rs2,345 crore, 33.3% higher than Rs 1,760 crore in FY2024. Return on Equity (RoE) was 12.4%, compared to 10.0% in FY2024, while Return on Assets (RoA) stood at 1.9%, up from 1.7% in the previous year.

Segment-wise disbursement performance

Asset Class	Year ended 31st March 2025	Year ended 31st March 2024	Change (%)
Passenger vehicles	23,527 (41%)	22,920 (41%)	3%
Commercial vehicles and construction equipment	12,290 (21%)	12,512 (22%)	-2%
Pre-owned vehicles	9,468 (16%)	9,745 (17%)	-3%
Tractors	5,871 (10%)	5,443 (10%)	8%
3-Wheelers	2,445 (4%)	2,496 (4%)	-2%
SME	3,010 (5%)	2,029 (4%)	48%
Others*	1,288 (2%)	1,063 (2%)	21%
Total	57,900 (100%)	56,208 (100%)	3%

* Others include Farm Implements, Gensets, Personal and Consumer Loans. Figures in bracket indicates share of overall disbursement

The passenger vehicle market has seen a shift towards premium models, with growing customer preference for SUVs. Consequently, the growth in passenger vehicles disbursement was at 3% YoY.

The tractor industry experienced an uptick in demand, leading to a disbursement growth of 8% YoY.

The SME segment achieved an impressive YoY growth of 48%, reflecting strong performance and consistent focus on this key business area.

Key Ratios

Particulars	For the year ended 31st March 2025	For the year ended 31st March 2024
Debt / Equity	5.70:1	5.18:1
Net Profit Margins (%)*	14.6%	13.0%
RONW (Avg. net worth)	12.4%	10.0%
Capital adequacy	18.3%	18.9%
Tier I capital	15.2%	16.4%
Tier II capital	3.1%	2.5%
Gross Stage 3%	3.7%	3.4%
Net Stage 3%	1.8%	1.3%
Provision Coverage Ratio for Stage - 3 assets	51.2%	63.2%
Liquidity Coverage Ratio	277%	313%

* Net profit margin (%) = Profit after ratios, Duringthe except net stage-3, experienced a variation greater than 25% compared to the previous year. The net stage-3 ratio increased by 43.3% during the financial year, primarily due to two factors: a decrease in the provision coverage ratio for gross stage-3 loans, which declined from 63.2% in FY2024 to 51.2% in FY2025, and an increase in gross stage-3 loans, which rose from

3.4% in FY2024 to 3.7% in FY2025.

Business Outlook

MMFSL aims to expand its presence in Emerging India and unlock the full potential of financial services. The Company continues to invest in strengthening its distribution network, technology infrastructure, digital capabilities and human capital across functions and businesses. Additionally, MMFSL is enhancing its risk management framework by using digital due diligence tools for customer onboarding and further strengthening the centralisation of document reviews. These measures reinforce the Companys checks and balances, ensuring a robust and resilient business model.

Risk Management

The Company recognises that volatility in the operating environment poses significant challenges to global enterprises. In response, it has instituted a proactive risk management framework designed to anticipate and mitigate potential threats. The Risk Management Committee assists the Board in identifying, monitoring, and evaluating the Companys risk exposures. It conducts regular reviews of risk mitigation strategies, the outcomes of which are submitted to the Board for further evaluation. Periodic assessments are undertaken to ensure the effectiveness of these measures, with corrective actions and process enhancements implemented as necessary.

Risk Management Process

The Companys risk management system is integrated across all key functions and is guided by a structured and systematic approach. The process encompasses the following elements:

- Clearly defined roles and responsibilities for risk management

- A strategic framework underpinned by well-articulated objectives and guiding principles

- A dual approach to risk assessment and management, incorporating both ‘top-down and ‘bottom-up methodologies

- Adoption of the ‘ATMA framework Avoid, Transfer, Mitigate,Assume forthe mitigation, monitoring, and reporting of risks

- Alignment of risk appetite statements with strategic planning processes, supported by ongoing monitoring and reporting mechanisms.

- A comprehensive risk-monitoring plan that outlines review procedures, challenge mechanisms, and oversight activities.

- An ‘outside-in reporting model to ensure that risk-related information is actively monitored, managed, and communicated across all levels of the organisation.

The Companys risk management framework is designed to evaluate risks by thoroughly analysing and understanding potential exposures prior to making decisions related to transactions, operational processes, or system modifications. This framework is further strengthened through periodic reviews, implementation of control measures, self-assessment exercises, and continuous monitoring of key risk indicators.

Credit Risk:

Credit risk refers to the potential for financial loss arising from a decline in the creditworthiness of borrowers or counterparties. Such losses may occur if a customer or counterparty fails to meet their financial obligations, or if there is a deterioration perceived or actual in the credit quality of the portfolio.

Approach to Credit Risk Management

Effective credit risk management is fundamental to the Companys long-term sustainability. The process encompasses the identif ication, measurement, monitoring, and control of credit risk exposures through the following measures:

- Implementation of a comprehensive borrower credit scoring framework that avoids overly simplistic loan classifications. High-risk proposals are subject to enhanced scrutiny and are reviewed by senior credit approvers, with appropriate risk mitigants in place.

- Maintenance of asset quality through a rigorous credit appraisal system, complemented by continuous post-disbursement monitoring, thereby ensuring a low probability of default.

- Adoption of proactive risk mitigation strategies, supported by proprietary early warning indicators.

These include key risk metrics such as early delinquency trends, non-starter accounts, and quick mortality rates, enabling timely intervention.

Liquidity Risk

Liquidity risk refers to the potential inability to meet financial obligations as they fall due, including debt servicing requirements, or the inability to obtain external funding at reasonable costs.

Approach to Liquidity Risk Management

The Company has established a comprehensive Liquidity Risk Management (LRM) framework, governed by a Board-approved Liquidity Risk Management Policy. The implementation and oversight of this framework are entrusted to the Asset Liability Committee (ALCO) and the Asset Liability Management Committee (ALMCO), which ensure compliance with defined risk tolerance levels and regulatory limits.

In alignment with the Treasury Chest Policy, the Company maintains an adequate liquidity buffer, which is periodically reviewed to provide resilience against external financial shocks. Furthermore, the Company sustains a well-diversified lender base, deliberately avoiding overdependence on any single funding source.

Borrowing concentration is actively monitored to maintain a balanced and sustainable funding mix.

Interest Rate Risk

Interest rate risk arises from fluctuations in market interest rates, which may adversely affect borrowing costs, interest income, and net interest margins, particularly within the

Approach to Interest Rate Risk Management

The Company actively monitors and manages interest rate risk through regular sensitivity analyses conducted by the Asset Liability Committee (ALCO) and the Asset Liability Management Committee (ALMCO). These assessments evaluate the Companys exposure to interest rate movements and inform strategic decision-making.

The Liquidity Risk Management (LRM) framework outlines an optimal borrowing structure aimed at minimising interest costs, alongside an investment strategy designed to maximise returns. Prudential limits on both borrowings and investments are established to ensure effective risk containment. These policies, supported by periodic reviews, enable timely adjustments to lending and funding strategies, thereby mitigating the impact of interest rate volatility.

Operational Risk

Operational risk refers to the potential for financial loss resulting from internal process failures, human errors, system deficiencies, or external events, including legal and reputational challenges.

Approach to Operational Risk Management

The Company has adopted a comprehensive Operational Risk Management Policy that establishes a structured governance framework for the identification, assessment, and mitigation of operational risks. This framework clearly defines roles and responsibilities, ensures appropriate segregation of duties, and delegates authority in accordance with established protocols.

To enhance the Companys risk resilience, multiple risk management frameworks have been implemented, reinforcing defences against operational threats. Key Risk Indicators (KRIs) are systematically monitored to identify emerging risks and facilitate timely corrective actions. These measures collectively strengthen the Companys operational resilience and enhance its overall risk management capabilities.

Business Risk

As a Non-Banking Financial Company (NBFC), the Company is subject to various external risks that may affect its long-term sustainability and profitability. These include industry-specific risks, competitive dynamics, and factors influencing customer income levels such as agricultural productivity and climatic conditions.

Broader economic volatility and sectoral challenges may also contribute to the impairment of loan assets.

Approach to Business Risk Management sector. The Company analyses macroeconomic indicators and industry trends to anticipate and respond to market developments. In order to diversify its revenue streams and reduce dependence on vehicle finance, the Company has introduced tailored financial products and is actively exploring new growth avenues, including SME financing, digital lending models, and leasing solutions.

A proactive sales force, a broad portfolio of financial offerings, and a strong customer-centric approach collectively enable the Company to remain competitive, resilient, and responsive to evolving market conditions.

Compliance Risk

Compliance risk refers to the potential for legal or regulatory consequences arising from non-adherence to applicable laws, regulations, and supervisory guidelines.

Approach to Compliance Risk Management

The Company maintains strict compliance with the regulatory framework prescribed by the Reserve Bank of India (RBI) and other relevant authorities. This includes adherence to norms related to capital adequacy, fair practices, financial reporting, and asset classification. Under the revised scale-based regulatory framework introduced by the RBI in FY2021 and subsequently refined in FY2023 and FY2025, the Company has been categorised under the Upper Layer of Non-Banking Financial Companies (NBFCs).

To ensure ongoing compliance, the Company has instituted robust processes for risk assessment, capital adequacy evaluation, and stress testing. A

structured Circular Management Process facilitates the timely dissemination of regulatory updates to all relevant stakeholders. Additionally, a comprehensive

Compliance Testing Programme is in place to evaluate adherence to critical regulatory requirements. The findings from these assessments are reported to senior management, and corrective actions are tracked to ensure effective implementation.

Attrition Risk

The risk of losing high-performing and critically skilled employees poses a significant challenge to organisational continuity and performance.

Approach to Talent Retention

The Company fosters an employee-centric culture and continuously reviews its human resource policies to enhance workforce engagement and satisfaction.

Annual employee engagement surveys are conducted to identify key concerns, with targeted interventions implemented to address them effectively.

Compensation structures are benchmarked against industry standards to ensure competitiveness and retain top talent. Regular and open communication between Human Resources and business leadership facilitates the proactive resolution of employee issues, thereby minimising undesired attrition. Additionally, the Company invests in continuous learning and development initiatives to support career growth and skill enhancement.

Information Technology & Cyber Security Risk

The increasing reliance on digital infrastructure necessitates robust measures to effectively manage information technology (IT) and cybersecurity risks.

Approach to IT and Cyber Risk Management

The Company adopts a defence-in-depth cybersecurity approach to fortify its systems. This multi-layered strategy includes periodic testing of internal controls, conducting cyber resilience drills, and implementing

Artificial Intelligence (AI) and Machine Learning (ML)-based threat monitoring. Defence-in-depth measures also encompass:

- Perimeter Security: Firewalls and proxies to safeguard network boundaries.

- Access Controls: Multi-factor authentication (MFA) and Privilege Access Management (PAM) tools to limit access to sensitive information.

- Endpoint Security: Extended detection and response (XDR) and Data Loss Prevention (DLP) tools to protect endpoint devices.

- Data Protection: Ransomware-protected backups and encryption to secure critical data.

- Regular Monitoring: AI/ML-based Security

Operations Centre (SOC) tools for continuous threat detection and response to anomalies.

- Employee Awareness: Cybersecurity training programmes and awareness flyers to reduce risks from social engineering attacks.

- Incident Management: Disaster Recovery (DR) sites with regular data replication and incident response protocols for quick recovery.

Emerging Risk

Emerging risks, such as geopolitical tensions, economic stress, and global health crises (e.g., pandemics), have the potential to and impact financial stability.

Approach to Managing Emerging Risks

The Company adopts a prudent capital structure designed to ensure robust liquidity and the capacity to absorb economic shocks without compromising its creditworthiness or ability to meet debt obligations. Comprehensive business continuity plans are in place to facilitate uninterrupted operations during periods of crisis. Furthermore, the Companys strong customer relationships and engagement strategies enable it to navigate challenging environments with resilience and agility.

Market Risk

Market risk arises from fluctuations in interest rates, currency values, credit spreads and commodity prices, potentially impacting earnings and economic value.

Approach: The Company continuously monitors and manages market-linked securities as per internal and regulatory guidelines to mitigate market risks.

Climate Risk

Climate change presents a range of risks, including extreme weather events, environmental degradation, and economic losses resulting from natural disasters.

These factors can also influence the Companys Environmental, Social, and Governance (ESG) performance and associated ratings.

Approach to Climate Risk Management

The Company actively monitors climate-related risks and integrates them into its overarching risk management framework. In alignment with its commitment to environmental sustainability, the Company promotes green financing initiatives, including support for Compressed Natural Gas (CNG) and electric vehicles.

Environmental performance is transparently disclosed through internationally recognised platforms such as the Carbon Disclosure Project (CDP) and the Dow Jones Sustainability Indices (DJSI).

Further, the Company is exploring the deployment of solar energy solutions, transitioning to energy-efficient technologies, and participating in afforestation initiatives to support carbon sequestration and long-term sustainability objectives.

Material Developments in Human Resources:

This years journey revolves around talent transformation. We have strengthened leadership, empowered our people, enhanced capabilities, and built a culture where meritocracy and inclusivity thrive.

Strengthening Leadership and Attracting Top Talent

We reinforced our leadership by appointing seasoned professionals to key leadership roles ensuring strategic foresight and domain excellence in critical functions. We also capitalised on the Mahindra Groups internal talent ecosystem, enabling growth from within by transitioning capable leaders across entities into critical portfolios. This accelerated internal mobility has deepened our culture of career development. We continue to expand our future talent pipeline through robust campus trainee programs and leveraging the Groups MLP program. Our exploration of gig talent builds agility and draws in niche capabilities for short- to medium-term needs.

Growing High Potential Talent

Retaining and growing talent with care and precision is where real transformation takes place. Our high-potential talent programs span all levels, from early-career employees to senior leaders. Selection follows a rigorous process, ensuring the right individuals are identified. Mentorship is key, with senior leaders guiding participants through structured engagements. These programs foster a dynamic talent pipeline recognised through external accolades.

Capability Building with Precision and Purpose

We deliver curated functional skills-building interventions targeting specific performance outcomes.

Diagnostic assessments help us identify root causes and upskill teams. We trained our teams on driving contemporary financing opportunities and supported internal transitions with role clarity workshops and skill certifications. Digital dexterity is foundational, with

Generative AI embedded across functions to ensure alignment and enablement.

Information Technology

At Mahindra Finance, FY2025 has been a year of transformative growth, driven by our commitment to leveraging technology and innovation to enhance customer experiences, streamline operations, and drive business growth. Our focus has been on creating a seamless digital ecosystem that empowers both customers and employees while positioning us for sustainable expansion.

One of our key achievements this year has been the successful redesign of our customer app, which offers customers a convenient platform to manage loans, make repayments, and access a range of financial products. With its intuitive interface, the app has seen over 4.5 lakh customer sign-ups and 32K leads within three months of its launch, helping more customers engage with our services digitally. Complementing this initiative is the launch of the AI-powered chatbot, which supports customers across platforms like WhatsApp and our website. Available in multiple languages, our AI-powered chatbot has enhanced customer support and facilitated better engagement.

We have also made strides in transforming our collections process. Our new digital collections platform provides automated reminders and multiple payment options, enabling customers to manage repayments effortlessly while reducing operational costs. Additionally, advanced AI models have been integrated to improve risk management and customer engagement, leading to better underwriting and reduced payment defaults. These efforts collectively reflect our commitment to transparency, efficiency, and customer satisfaction.

Operationally, we have streamlined our processes through end-to-end digital loan systems, automating documentation and accelerating credit assessments.

This has significantly loan approvals while ensuring a seamless customer experience. On the technology front, we have strengthened our IT infrastructure by adopting cloud solutions for scalability and cost efficiency. Robust cybersecurity measures have been implemented to ensure the safety and privacy of customer data.

Our commitment to fostering financial inclusion remains unwavering. By integrating advanced technologies into our operations, we are not only reducing costs and improving efficiency but also providing personalised and accessible financial solutions to millions across rural and semi-urban India. These efforts solidify our position as a leader in promoting inclusive growth.

Internal Control System and their Adequacy

MMFSL has implemented a robust internal control system to safeguard its assets and ensure operational excellence. The Company maintains accurate transaction records and ensures regulatory compliance. It has established multiple policy frameworks to oversee business processes effectively, with Risk and Control dashboards regularly updated for key operations. The Company ensures that the management team and statutory auditors periodically review the effectiveness of these controls.

MMFSL has a dedicated internal audit team that defines an annual audit agenda, which is approved by the Audit Committee before implementation. The Company engages reputed audit firms to ensure that all transactions are properly authorised and reported in line with regulatory requirements. MMFSL ensures that the Audit Committee reviews these reports, strengthens internal controls and takes corrective actions wherever necessary.

Disclaimer

Certain statements in the Management Discussion and Analysis describing the Companys objectives and predictions may be ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward-looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effects of economic and political conditions in India, volatility in interest rates, new regulations, government policies and other incidental factors that may impact the Companys business as well as its ability to implement the strategy.