Paragon Finance Ltd Management Discussions

The Directors have pleasure in presenting the Management Discussion and Analysis Report for the year ended on 31^st March, 2023. This Report has been included in consonance with the Code of Corporate Governance as approved by the Securities and Exchange Board of India (SEBI).

ECONOMIC OVERVIEW

On the global front, economic activity remained largely resilient during FY2023, amidst geopolitical tensions & hostilities, persistence of inflation at elevated levels, tight financial conditions and turmoil in the banking system in some advanced economies (AEs). The year started with the impact of the Russia-Ukraine war that resulted in a sharp commodity price surge, leading to inflationary pressures. This was over and above the existing layer of global inflation, due to COVID-related stimulus measures, and a post-pandemic resumption of full- fledged economic activity across countries.

According to the IMFs estimates released in January 2023, global growth is expected to moderate from 3.4 per cent in 2022 to 2.9 per cent in 2023, and 3.1 per cent in 2024, with a sharper declaration projected for advanced economies, relative to emerging market and developing economies.

India continues to be among the fastest-growing economies in the world. The Indian economy continues to show strong resilience to external shocks and its real GDP is estimated to grow at 7.0% in FY 2022-23 compared to 9.1% in FY 2021-22. Indias per capita income at current prices is estimated to have increased 14.6% from 1.50 lakh in 2021-22 to 1.72 lakh in FY 2022-23. The IMF projects the Indian economy to expand at 5.9% in FY 2023-24 before rising to 6.3% in FY 2024-25.

Indias GDP has reached $3.75 trillion in 2023, from around $2 trillion in 2014; moving from 10 th largest to 5 th largest economy in the world. India is now being called a Bright Spot in the global economy.

INDUSTRY OVERVIEW

NBFCs have been strengthening their presence in the market and have made significant progress than the banks. Non-Banking Financial Company (NBFC) is a key element of the financial sector providing corpus to small and medium players and enriching their business. Despite the uncertain global environment since early 2020, the Indian financial sector has remained stable and resilient. Furthermore, the Non-Banking Financial (NBFC) sector has played a crucial role in bridging the credit gap and supporting the growth of various sectors such as micro, small and medium enterprises (MSMEs), agriculture and affordable housing, among others.

The Indian commercial vehicle (CV) industry has recovered post the COVID-19 pandemic. In F.Y. 2022-23, commercial vehicles witnessed the second-highest domestic sales growth in India. As per SIAM, the sales of overall Commercial Vehicles increased from 7,16,566 units in FY 2021-22 to 9,62,468 units in FY 2022-23, representing 34% substantial growth rate. Furthermore, the sales of Medium and Heavy Commercial Vehicles (MHCVs) increased from 2,40,577 units in FY 2021-22 to 3,59,003 units in FY 2022-23 indicating a growth of 50%. MHCVs market share poised to grow further, driven by increased activity in the construction and infrastructure sectors, while truck utilization reached an all-time high of 90%.

In F.Y. 2022-23, the CV industry in India is expected to witness positive volume growth of 22- 24%, driven by positive demand drivers from multiple industries and growing freight movements. Several Original Equipment Manufacturers (OEMs) are testing the introduction of E-variants in the commercial vehicle category.

FINANCIAL PERFORMANCE

The details of the financial performance of the Company is given in the Directors Report.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company recognizes the pivotal role of a robust internal control system and processes in ensuring its overall well-being. With a clearly defined organizational structure, documented policy guidelines, and an established authority matrix, the Company maintains efficient operations, compliance with internal policies, laws, and regulations, as well as the protection of its resources.

To supplement the internal control system, the company conducts extensive internal audits, conducts regular reviews by management, and adheres to standard policies and guidelines. These measures ensure the reliability of financial and other records. The Audit Committee periodically reviews the reports generated by the internal audits.

Considering the size of its operations, the company has implemented an internal control system that includes monitoring procedures appropriate for its scale. The Internal Auditor continuously works on financial and other matters to ensure compliance and accuracy. Additionally, the findings from various audits undergo periodic review by the Audit Committee of the Board.

RISK MANAGEMENT

In light of the growing uncertainties in the business environment, the Company remains committed to prioritizing risk management. By focusing on risk management, the Company aims to safeguard its operations and optimize outcomes. The implementation of robust risk management practices ensures that potential risks are addressed proactively, leading to a more resilient and adaptive organization. The Company recognizes the importance of identifying, controlling, and mitigating risks. By emphasizing risk management and closely monitoring economic and market conditions, the management can make informed investment decisions to navigate uncertainties effectively.

HUMAN RESOURCES

Your company appreciates the significance of human resources and remains steadfast in our commitment to their ongoing development and success. Through strategic hiring practices and a focus on talent retention, we strengthen our workforce, positioning ourselves for future challenges and expansion. By adopting this approach, we foster a culture of excellence and dedication within our workforce. We understand that by investing in the best resources and providing opportunities for growth, we can not only meet the demands of the future but also enhance our overall organizational performance and achieve our long-term objectives.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis and Directors Report describing the Companys strengths, strategies, projections and estimates, are forward-looking statements and progressive within the meaning of applicable laws and regulations. Actual results may vary from those expressed or implied, depending upon economic conditions, Government Policies and other incidental factors. Readers are cautioned not to place undue reliance on the forward looking statements. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. These statements involve a number of risks, uncertainties and other factors namely; economic conditions, Government Policies that could cause actual results to differ materially from those that may be implied by these forward looking statements.

KEY FINANCIAL RATIOS

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 (Amendment Regulations) the company is required to give details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios.

The Operating Profit Ratio for the period under review was 3.02 percent as compared to 37.82 percent in previous year, the Net profit margin ratio for the period under review was (7.64) percent as compared to 25.51 percent in previous year, the Current Ratio for the period under review was 29.80 percent as compared to 73.24 percent in previous year, the Debt Equity ratio for the period under review was 0.06 as compared to 0.03 in previous year, the Interest Coverage Ratio for the period under review was 2.92 percent as compared to 42.47 percent in previous year.

For and on behalf of the Board of Directors

Sd/-

Sanjay Kumar Gupta

Whole-time Director

DIN-00213467

Place: Kolkata