Prudent Corporate Advisory Services Ltd Management Discussions

1. Indian Economic Overview

Growth and Macroeconomic Resilience

Against a turbulent global backdrop, India stood out for its stability and momentum, retaining its position as the worlds fastest-growing major economy. The economy was broadly healthy across every dimension that matters.

Domestic demand held up well. Private consumption expanded 7.7% and gross fixed capital formation grew 7.1%. Together they drove real GDP growth of 7.6% in FY2026, up from 7.1% the previous year, according to the National Statistics Offices Second Advance Estimates. The year gathered momentum as it progressed, with GDP growth rising from 6.7% in the first quarter to 8.4% in the second and 7.8% in the third, before moderating to 7.3% in the fourth as global headwinds began to weigh.

Savings were equally healthy. The gross domestic investment rate rose to 35.5% of GDP and the gross domestic savings rate to 34.9%.

The two numbers being close means India is largely financing its own growth from domestic savings rather than relying on foreign capital. The household sector remains the economys primary source of funds, bringing stability to the overall financing environment.

On the production side, services stayed buoyant and manufacturing strengthened. Foreign confidence held firm, too. Foreign direct investment reached a record USD 94.5 billion in FY2026. The appetite for long-term investment in India remained strong even as foreign portfolio flows turned volatile.

Inflation and the Monetary Policy Stance

Inflation remained largely under control through the year. Headline retail inflation touched a historic low of 0.3% in October 2025 and averaged in the low single digits across FY2026. It firmed up to 3.2% by February and 3.4% by March 2026 as energy prices began to feed through. Core inflation held steady at around 3.7%. ¹

Wholesale inflation told a different story, reaching 8.3% by April 2026. The gap between contained consumer prices and rising wholesale prices signals that some cost pressures are yet to pass through to the end consumer.

With inflation broadly contained, the Reserve Bank of India held its policy repo rate at 5.25% at its June 2026 meeting. It projected real GDP growth of 6.6% and CPI inflation of 5.1% for FY2027. The key risks identified were a sub-normal monsoon and prolonged global supply chain disruption. ²

For long-term savers, the broader picture was one of stability. An economy growing near 7%, inflation within acceptable levels and a central bank with room to act if needed. ³

The Financialisation of Household Savings

The most important structural trend for a business like Prudent is the steady migration of household savings from physical assets like gold, property and cash into financial assets and within those, into market-linked products.

The household net financial saving rate rose to 7.1% of GDP in FY2025 from 5.9% a year earlier. This surplus is increasingly finding its way into capital markets. Resource mobilisation through the primary market rose to 72.3 lakh crore in the second half of FY2026. Monthly SIP contributions reached a record high of around 730,000 crore. Life insurance premiums grew strongly in the high teens, reflecting a broadening of formal financial participation. ⁴

The resilience of this domestic base was tested during the year.

The West Asia conflict triggered a sharp market correction from late February 2026. The India Volatility Index rose to 27.9 by the end of March from 11.1 six months earlier. Foreign portfolio investors turned net sellers. Domestic institutional investors, mutual funds in particular, acted as a powerful counterbalance. Sustained systematic inflows lent the market real stability. When markets turned volatile, it was this domestic base that held firm. It is the same base that Prudents business is built to serve. ⁵

2. Industry Outlook

The Indian Mutual Fund Industry

Scale and the Under-Penetration Opportunity

The mutual fund industry closed FY2026 with assets under management of 773.73 lakh crore. That is more than three times the 722.26 lakh crore of March 2020. The year ended with 12.1% growth, even after a sharp 10.1% monthly contraction in March, as mark-to-market losses from the West Asia conflict weighed on equity portfolios.

But the bigger picture is what matters most. Indias mutual fund assets are still only around 20-21% of GDP. In developed markets, that number is well above 75%. On widely cited projections, that ratio could climb to 112% by 2047. The runway ahead is long.⁷

An Equity-Oriented, SIP-LedMarket

Equity-oriented schemes remain the largest segment of the industry, accounting for 43.4% of assets.

Debt follows at 22.7%, other schemes, including the fast-growing passive category, at 19.1% and hybrid at 14.0%.⁸ The systematic investment plan habit has been the backbone of this equity tilt. Monthly SIP contributions reached around 730,000 crore, providing a steady and consistent flow into the market. When foreign portfolio investors turned sellers during the February-to-March correction, domestic flows stepped in. Channelled largely through mutual funds, these flows absorbed selling pressure and kept the market stable. ⁹

Encouragingly, investors are staying invested for longer. By March 2026, more than a third of regular plan SIP assets had been held for over five years. That is slightly higher than a year earlier and well above the direct plan equivalent of around a fifth. The gap reflects the value of having a distributor who guides the investor through periods of volatility and keeps them on course.¹⁰

The Individual Investor and the B-30 Frontier

The industry is increasingly a retail story. Individual investors held 62.3% of total AUM in March 2026. Their holdings grew 11.5% over the year to 745.96 lakh crore. Their preference is decisively for equity. Individuals own 90.6% of all equity- oriented assets and 78.7% of hybrid assets.¹¹

Geographically, however, assets remain concentrated in the top 30 cities, which account for 81.2% of AUM. The Beyond 30 cities contribute the remaining 18.8%. But the B-30 story is more compelling than its share suggests. These smaller cities are underpenetrated and represent a significant growth opportunity for organised distributors.

Capturing that B-30 opportunity requires feet on the ground and trusted distributor relationships. With distributors gathering close to 72% of all equity-oriented assets, the industry remains fundamentally distributor-led. For Prudent, the B-30 opportunity and the industrys distributor-led nature point to the same conclusion: more partners, more cities and more clients. ¹²

New Frontiers - Specialised Investment Funds

The industrys product landscape is widening. Specialised Investment Funds, a new category positioned between mutual funds and portfolio management services and designed for more sophisticated investors, crossed 713,000 crore in assets within months of launch. One industry estimate suggests the segment could exceed 71 lakh crore by 2028. Seven asset managers have already launched offerings. Several SIF strategies also demonstrated their value during the March 2026 market decline by limiting downside for investors.

Each new category and investor widens the opportunity Prudents open architecture platform is built to serve. ¹³

3. Company Snapshot

Identity and Vision

For more than two and a half decades, Prudent has been dedicated to a single idea: money through wisdom, empowering the distributors and investors it serves to build lasting wealth. Today, it is Indias second- largest non-banking mutual fund distributor and the trusted partner to a nationwide network of channel partners. ¹⁴

Prudents vision is to be the most preferred financial services player for the masses, powered by technology. Its mission is to build a strong organisation rooted in its core values: putting clients first, staying focused and treating every stakeholder with fairness, dignity and respect. It pursues this through an open-architecture, business-to-business-to- consumer model: an integrated digital-and-physical platform that offers its channel partners and their clients a full suite of financial products.

FY2026 in Numbers

FY2026 was a year of resilient and broad-based growth across every key metric.

Closing mutual fund AUM rose to 71,19,304 crore, of which 96.8% was equity-oriented. Equity net sales of 713,911 crore were the highest ever in Prudents history. The monthly SIP flow reached 71,188 crore in March 2026. The investor base grew to 20.71 lakh served by a network of 36,880 mutual fund distributors.

Mutual fund revenue grew 21% for the full year, in line with quarterly average AUM growth of 21.7%. Despite the impact of back book repricing, yields have remained stable at 91 basis points for three consecutive years. Insurance revenues grew 18% on the back of strong fresh premium growth. Health insurance premiums grew by 35% and life insurance premiums grew by 28%. Revenue growth was softer than premium growth due to commission rate rationalisation in health insurance following the GST reduction to nil rate and a change in product mix in life insurance.

Together, these two verticals drove total revenue from operations up 19.4% to 71,317.3 crore. Commission and fee expenses grew at a similar pace of 19.8%. Operating profit rose 18.2% to 7310.2 crore at a margin of 23.6%.

Profit after tax grew 13.5% to 7222.1 crore. Growth in operating profit was lower than growth in other income due to a reduction in other income following the sharp market correction in March. On the strength of these results, the Board recommended a final dividend of 73.50 per share.

Across every key parameter, the business held its ground and grew. The mutual fund book expanded, the insurance vertical delivered, the partner network widened and the balance sheet stayed strong. Prudent enters FY2027 from a position of strength. ¹⁵

Segment Mix and Footprint

Prudent earns its revenue across four complementary segments: mutual fund distribution, insurance distribution, stock broking and allied services and other financial products. Mutual Fund distribution remains the core engine; the others reflect Prudents commitment to serving every financial need of its partners and their clients

Mutual Fund Distribution

Mutual fund distribution remains the core of Prudents business, accounting for 84.4% of revenue. Prudent is Indias second-largest non-banking mutual fund distributor, with a network of 36,880 partners across 143 locations in 21 states. Every fifth mutual fund distributor in India is empanelled with Prudent. Closing AUM for the year stood at 71,19,304 crore with 96.8% in equity-oriented schemes.

The year was resilient despite turbulent markets. Equity AUM grew 15.5%, driven by record net sales of 713,911 crore for the year. The strength of the SIP book was central to this performance. The monthly SIP book grew by 7209 crore over the year to 71,188 crore and Prudents SIP market share improved to 3.65% by March 2026. Growth was further supported by the acquisition of Indus Capital, which added around 72,104 crore of predominantly equity AUM to the book.

Mutual fund revenue grew 21% for the full year, in line with quarterly average AUM growth of 21.7%. Despite the repricing of back books, the yield held steady at 91 basis points for three consecutive years. As Prudent enters FY2027, the AUM as of 31 May 2026 stands at 71.34 trillion, 11% higher than the full-year average AUM of FY2026. This sets up a strong revenue runway for the mutual fund vertical in FY2027.

Insurance Distribution

Insurance distribution contributed 11.6% of revenue during the year. Prudent distributes life and general insurance products across leading insurers. Of the 36,880 mutual fund partners, 13,386 are also empanelled as Point-of-Sale Persons for insurance. The focus is on deepening insurance penetration within the existing MFD base rather than building a separate distribution network.

Within life insurance, fresh premiums grew 28% during the year. Post-2023, the life insurance industry saw a sharp slowdown in guaranteed plan sales following regulatory changes that impacted high-ticket flows. Prudent used this period to reshape its product mix. The business was rebuilt around the term plus ULIP category, which offers clients both life cover and equity exposure in a single product. This category is now the largest- selling life insurance product within Prudents network and has helped the business recover strongly from that period of disruption.

Within general insurance, health insurance remained the primary focus and delivered standout performance. Fresh health insurance premiums grew 35% during the year, reflecting the growing awareness among clients for adequate health cover.

Total insurance revenue grew 18% for the full year. Revenue growth was softer than fresh premium growth for two reasons. Commission rates in health insurance were rationalised from October 2025, following the reduction of GST to nil rate and the product mix within the life insurance vertical shifted toward ULIP products, which carry a lower commission yield.

Insurance remains a key focus area for Prudent going forward. The large and growing MFD base presents a significant opportunity to increase Point of Sale Person penetration and cross-sell insurance to an existing and trusted client base.

Other Financial Products

Other financial products contributed 2.6% of revenue during the year. The segment covers distribution of PMS/

AIF, fixed deposits, bonds, smallcase portfolios and loans against securities. PMS and AIF mobilisation contributed the largest share, at around 66% of segment revenue, followed by fixed deposits at around 18%, with the remainder from other products.

PMS and AIF AUM grew to 71,670 crore by March 2026, a 46% increase from 71,143 crore in March 2025. Fixed deposit mobilisation also had a strong year at 7388 crore, 37% higher than 7282 crore in FY2025.

Reported revenue growth appears flat at around 5% despite strong underlying growth in PMS, AIF and fixed deposits. This is because the prior year included approximately 76.7 crore of revenue from distributing P2P lending products. As per the latest RBI guidelines, this product has become unviable and Prudent has discontinued selling it. Excluding this, the segment grew by approximately 34-35%, reflecting the true pace of progress in this vertical.

Stock Broking and Allied Services

Stock broking and allied services contributed 1.4% of revenue during the year. The segment enables retail clients to trade in equities and equity derivatives through the FundzBazar broking platform. Revenue was 718.7 crore, lower than the previous year, reflecting subdued retail trading activity through a volatile market. As markets stabilise, revenue from this vertical should normalise.

4. Financial Performance

Revenue from Operations

Consolidated revenue from operations grew 19.4% to 41,317.3 crore in FY2026 from 41,103.6 crore in FY2025. The two core verticals led growth. Mutual fund distribution contributed 41,102.4 crore, up 21% in line with quarterly average AUM growth of 21.7%. Insurance distribution contributed 4152.0 crore, up 18%, driven by strong growth in fresh premiums across life and health insurance despite a mid-year reset of commission rates.

Operating Profit and EBITDA

Operating profit grew 18.2% to 4310.2 crore with margins broadly stable at 23.6% against 23.8% in the previous year. Employee costs excluding ESOP charges rose 21.2% during the year. This was slightly higher than usual due to the Indus acquisition and a one-time provision related to changes in labour codes.

Profit after Tax and Margins

Profit after tax grew 13.5% to 4222.1 crore from 4195.6 crore. Earnings per share rose to 453.63 from 447.25. PAT growth was lower than operating profit growth for one clear reason. The sharp market correction in March weighed on other income, which fell as treasury investments were marked down at years end. The Board recommended a final dividend of 43.50 per share, up from 42.50 in the previous year.

Five-Year Financial Summary

The longer view clearly shows the compounding. Over FY2022-FY2026, revenue from operations roughly tripled, profit after tax compounded at close to 30% per annum and closing AUM rose from under 450,000 crore to 41,19,304 crore, all while return on equity averaging 31% during this period. The table below sets out the key metrics; figures are rounded.

Metric (Rs crore unless stated)	FY22	FY23	FY24	FY25	FY26	CAGR
Closing AUM	49,473	56,189	83,384	1,03,515	1,19,304	24.6%
Revenue from Operations	451	611	805	1,104	1,317	30.7%
Operating Profit (EBITDA)	115	173	193	262	310	28.1%
EBITDA Margin (%)	25.6	28.4	24.0	23.8	23.6	-
Profit after Tax	80	117	139	196	222	28.9%
PAT Margin (%)	17.8	19.1	17.2	17.7	16.9	-
Earnings per Share (4)	19.4	28.2	33.5	47.2	53.6	28.9%
Equity Net Sales	5,282	4,914	6,164	12,606	13,911	27.4%
Return on Equity (%)	33.8	33.3	28.8	29.3	28.7	-

5. Risk Management and Concerns

Prudent Corporate Advisory Services actively identifies and evaluates various sources of risk, their impact areas and potential consequences. The Company employs a robust risk management framework that involves department heads and senior management, under the guidance of the Board of Risk Management Committee. They develop and implement risk mitigation plans to address identified risks, which are broadly categorised as internal or external. These encompass technological, financial, operational, strategic business, legal, regulatory compliance, cybersecurity, competition and intellectual property rights risks.

1. Competition Risk:

The financial services industry is undergoing rapid evolution driven by technological advancements and shifting customer preferences, resulting in intense competition from both existing and new players. To mitigate this risk, Prudent proactively upgrades its technology infrastructure across various business aspects, including sales, risk management, fraud detection, client service and settlement. Prudent mitigates the risks of intense market competition by staying ahead in technology adoption, maintaining operational efficiency and focusing on customer-centric practices.

2. Regulatory Changes:

Operating in an environment with ongoing and significant regulatory changes poses a critical risk. Historical regulatory changes have impacted the business, such as the ban on upfront commissions and the rationalisation of Total Expense Ratio (TER) rates. The Company maintains a strong vigilance regarding evolving legislation and regulatory focus, ensuring compliance and adapting its operations accordingly. Addressing regulatory challenges involves high costs and resource allocation, but Prudent is committed to upholding a robust regulatory framework.

3. Operational Risk:

Operational risk arises from inadequate or failed processes, human errors, or external events that compromise the organisations ability to perform its functions effectively. Prudent strives to maintain consistent, seamless business operations, establishing resilience and recovery capabilities across its processes. Ensuring reliability in technology systems, real estate services and third- party suppliers mitigates our operational risks. Proactively addressing these risks safeguards the Companys operations, protects customers and maintains its reputation.

4. New and Emergent Technology:

While technological advancements offer opportunities for innovation, they also introduce inherent risks. The increased adoption of electronic payment systems and direct access to trading markets can lead to cost reductions, but may also result in lower commissions, fees and transaction margins. Prudent carefully evaluates and manages the potential risks associated with new technologies, maintaining a proactive approach to risk assessment throughout the implementation process to ensure security and stability.

5. Reputation Risk:

Reputational risk affects the Companys trustworthiness and competence. Any significant lapse in integrity, compliance, customer service, or operational efficiency can harm Prudents reputation. The Board of Directors plays a crucial role in managing reputation risk by formulating and enforcing a robust strategy, ensuring high standards of integrity and compliance and building stakeholder trust.

6. Cybersecurity Risk:

Given the increasing reliance on digital platforms, cybersecurity risk is significant. Cyber threats and data breaches can result in substantial financial losses, reputational damage and legal consequences. Prudent companies should enhance their cybersecurity measures, regularly update their security protocols and conduct ongoing employee training to safeguard against cyber risks.

7. Economic and Market Volatility:

Economic downturns, market volatility and geopolitical events can affect investor sentiment and financial markets, impacting Prudents AUM and revenue. Diversifying its investment portfolio and maintaining strong liquidity positions can help mitigate these risks.

6. Human Capital

Headcount and Capability Building

Prudent ended the year with about 1,540 team strength, an increase that reflected both organic hiring and the addition of the Indus team. Prudent keeps investing in its people. It trains them in products, technology and client relationships. These skills help its teams work better. In turn, they help the partner network grow more productive. A one-time provision related to the new labour code was recognised during the year and with the annual appraisal cycle now complete, employee costs for the existing base has risen by roughly 14% in FY2027. ¹⁶

Employee Stock Option Scheme 2025

To align employees with long-term value creation, shareholders approved the Prudent Employee Stock Option Scheme 2025 by special resolution at the Annual General Meeting held on 31st July 2025. Under the scheme, Prudent granted 1,30,945 stock options with a face value of 45 each, at a grant price of 42,632 per option, to eligible employees of the Company and its wholly owned subsidiary. The scheme led to an ESOP cost of 43.3 crore during the year. ¹⁷

Leadership

Prudent remains a professional-led organisation. It is guided by Mr Sanjay Shah, its Founder and Managing Director. The senior management team is led by Mr Shirish Patel as CEO, with Mr Chirag Shah as non-executive director. The team has deep roots in the mutual fund and insurance distribution businesses. The leadership brings long operating experience. It works under the oversight of a Board that gives an independent view on strategy, risk and governance. This continuity of leadership has been a defining feature of Prudents journey across more than two and a half decades and many market cycles.

The Founders Share Gift

During the year, the Founder and Managing Director, Mr Sanjay Shah, gifted 1,64,907 equity shares to a group of 657 people. These shares were valued at about 444.03 crore. The group included employees and members of his personal staff. He gave the shares free of cost, as a gesture of personal affection and appreciation.

The gift is more than an act of generosity. It reflects the culture of shared ownership and gratitude that Prudent wants to sustain. It gives the people who helped build Prudent a share in its success.¹⁸

7. Sustainability and ESG

Financial Inclusion as Purpose

For Prudent, sustainability begins with its core purpose, money through wisdom and the financial inclusion that purpose advances. By equipping mutual fund distributors with technology, training and trust, Prudent extends formal, distribution-led financial products to households well beyond the metropolitan centres. Its reach into 143 locations across 21 states, over 740 districts and close to 88% of Indias pin codes, with a deliberate tilt towards the underserved, equity-hungry B-30 market, makes the democratisation of wealth creation not a peripheral programme but the substance of what the business does every day. By channelling household savings into long-term, market- linked investments, Prudent contributes directly to deepening Indias capital markets and enhancing the financial resilience of its citizens.¹⁹

BRSR Linkage and Governance

Prudents environmental, social and governance disclosures are made in accordance with the Securities and Exchange Board of Indias Business Responsibility and Sustainability Reporting (BRSR) framework, structured around the nine principles of the National Guidelines on Responsible Business Conduct. As an asset-light, technology-led business, Prudents direct environmental footprint is limited and its most material ESG impacts arise on the social and governance dimensions, responsible distribution and suitability, data privacy and security, employee and partner well-being and sound board oversight. The detailed quantitative BRSR disclosures, including the relevant environmental, social and governance metrics, are presented in the Business Responsibility and Sustainability Report, which forms part of this Annual Report.

Community Initiatives and National-Priority Alignment

Prudents social contribution is, in large part, intrinsic to its model. Every distributor it enables is a livelihood created or expanded, typically a local entrepreneur building a sustainable distribution practice in their own town and every investor brought into the formal fold is a household given the tools to plan for education, retirement and security. This places Prudent squarely alongside national priorities: the financialisation of household savings, the spread of financial literacy and the inclusion goals embedded in the vision of a Viksit Bharat by 2047, to which a deeper, more broadly owned mutual fund industry is central. Alongside this, Prudent pursues community and corporate social responsibility initiatives, with an emphasis on financial literacy and investor awareness, complemented by a culture of shared ownership, as reflected in initiatives such as the founders share gift. The detailed account of community programmes and CSR expenditure is set out in the relevant statutory reports accompanying this Annual Report.

8. Strategic Outlook and Cautionary Statement

Prudent enters FY2027 from a position of strength with clear priorities.

In the mutual fund business the focus is twofold. The first is organic growth through bringing more distributors onto the platform. Prudent plans to open 30 new branches during the year with a particular focus on B-30 markets. The second is inorganic growth through selective acquisitions of the kind represented by Indus Capital. Both paths bring more partners and more AUM to the platform.²⁰

Specialised Investment Funds represent an emerging opportunity that Prudent is actively preparing for. Working alongside AMCs Prudent is training more distributors to get SIF certified. With over 1,100 SIF certified distributors already on the platform the foundation is in place. SIF AUM could grow multifold from its current base and Prudent intends to be at the front of that growth.

Increasing distributor productivity remains a constant focus. The rollout of edge+ across the partner base is central to FY2027. Beyond edge+ Prudent is evaluating broader applications of artificial intelligence within the business including in customer care to smoothen operations and improve response times.

In insurance the priority is to deepen penetration within the existing partner network. More mutual fund distributors will be activated as Point of Sales Persons during the year giving them the ability to cross sell insurance products to their existing client base. The opportunity within the network is large and largely untapped.

The bigger picture is simple. Indias mutual fund and insurance industries are still in their early chapters. Prudent is a focused player with a clear view of where the growth is. The plan is to keep doing what works and do more of it.

Cautionary Statement on Forward-Looking Statements

This Management Discussion and Analysis contains forward-looking statements within the meaning of applicable securities laws and regulations. These statements, which may be identified by words such as ‘expect, ‘anticipate, ‘intend, ‘believe, ‘estimate, ‘plan and similar expressions, are based on the managements current expectations, assumptions and projections and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Such factors include changes in economic conditions, market movements, government and regulatory policy, competition and other risks. Prudent Corporate Advisory Services Limited undertakes no obligation to update or revise any forward-looking statement publicly, whether because of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these statements.