Sunshine Capital Ltd Management Discussions

A. ECONOMIC OUTLOOK

F.Y. - 2023-24 Macroeconomic Overview Economy Back to Growth, Business as Usual

The Non-Banking Financial Companies (NBFCs) in India have been integral to the countrys economic development, offering financial services and complementing the banking sector in reaching out to the unbanked segments of society. The journey from their inception in the 1960s to todays digital age reflects a significant transformation, underscored by adaptability and a forward-thinking approach to embracing change. The NBFCs have played a pivotal role in the Indian financial sector for decades, offering services such as loans and advances, acquiring shares/stocks/ bonds/debentures/securities issued by the government or local authority, and other market instruments.

The rationale behind delving into the NBFC realm, particularly at this juncture, is twofold. Firstly, this sector rapidly evolves with an unwavering commitment to highlighting and fostering excellence within the financial ecosystem. Secondly, NBFCs play an essential role in powering Indias economic growth. By showcasing how these institutions leverage cutting-edge technologies such as Artificial Intelligence (AI), Machine Learning (ML), Block chain, and Big Data analytics, we celebrate their achievements and underscore the transformative impact these innovations have on financial inclusion and operational efficiency across the nation.

As we delve into this domain, let us remember that our collective legacy of pushing the industry towards uncharted territories makes this journey necessary and imperative for the continued growth and success of the NBFC sector in India. For over a decade, we have spearheaded the digital transformation within the industry through the Tech Summit, Indias most extensive and longest-running NBFC Congregation dedicated to this cause, now proudly in its 16th iteration. Holding the baton firmly, we are prepared to advance the industry further, pushing relentlessly towards innovative boundaries by integrating new-age technologies. This effort is critical as we aim to redefine and enhance the landscape of financial services through continuous innovation and strategic foresight. Our dedication to this cause stems from a deep-rooted belief in NBFCs potential to transcend traditional financial paradigms and offer more inclusive, efficient, and secure financial services that cater to the diverse needs of Indias population.

The historical evolution of NBFCs in India is marked by gradual regulatory and structural changes to enhance their role in financial inclusion and economic development. Initially, NBFCs operated with minimal regulatory oversight, focusing primarily on niche markets, including industrial loans, equipment leasing, and hire purchases.

The digital journey of NBFCs in India began in the late 1990s, with the advent of the internet and the initiation of computer-based operations. The early 2000s marked the introduction of essential online services, focusing primarily on information dissemination rather than interactive services. However, the fundamental transformation started in the late 2000s, when NBFCs began to adopt more sophisticated online transaction systems, e-KYC processes, and mobile banking solutions.

Embracing the Winds of Change

The evolution of NBFCs in India represents a remarkable journey of adaptability and innovation, underscoring their pivotal role in driving economic growth and financial inclusion. From their inception to the digital era, NBFCs have undergone a transformative journey, embracing technological advancements to redefine financial services delivery.

The digital transformation of NBFCs reflects a shift in operational paradigms and a fundamental reimagining of the financial ecosystem. By integrating advanced technologies such as AI, ML, Blockchain, and offering new avenues for innovation and efficiency. Moreover, emerging technologies on the horizon, including Quantum Computing, the Internet of Things (IoT), and Distributed Ledger Technology (DLT), promise to usher in a new era of financial services characterised by unparalleled speed, security, and sophistication.

The vision for the future of NBFCs in India is inclusivity, efficiency, and sustainability. By leveraging the power of technology and human insight, NBFCs are poised to shape a financial services landscape that caters to customers diverse needs while driving economic growth and stability. As NBFCs continue to evolve and innovate, they are not just adapting to change but leading the way towards a brighter, more digitally enabled future for finance in India.

B. COMPANY OVERVIEW

The company is engaged in trading in shares, financial services and investment activities where the outlook of the business seems to be encouraging over and above, we have been diversified into different businesses ranging from third party product distributions (lowest balance sheet risk) to originating unsecured personal loans, corporate loans (highest balance sheet risk). We believe that we are well placed to leverage on the growth opportunities in the economy.

C. FINANCIAL PERFORMANCE

During the financial year 2023-24, the Company has recorded total Revenue of 7,423.01 Lacs as compared to the last year of 771.65 Lacs. The company has gained Profit Before exceptional item and Tax of 103.93 Lacs as compared to 195.38 Lacs as chart above. The Directors are optimistic about future performance of the Company.

D. OPPORTUNITIES & THREATS

Opportunities

Increase in Income levels will aid greater penetration of financial products. Positive regulatory reforms.

Increase in corporate growth & risk appetite.

Greater efficiency in debt market operations which will also help greater penetration. Increased securitization.

Focus on selling new product/services.

Threats

Inflation could trigger increase in consumer price inflation, which would dampen growth. Increased competition in both local & overseas markets.

Unfavorable economic development.

Market risk arising from changes in the value of financial instruments as a result of changes in market variables like interest rate and exchange rates.

E. RISK MANAGEMENTAND CONCERNS

Your company operates in the Financial Services Sector, which is affected by variety factors linked to economic development in India and globally which, in turn, also affected global fund flows. Any economic event across the globe can have direct or indirect impact on your company. To mitigate this, Company has diversified its revenue stream across multiple verticals.

Your Companys risk management system is a comprehensive and integrated framework comprising structured reporting and stringent controls. Through its approach it strives to identify opportunities that enhance organizational values while managing or mitigating risks that can adversely impact the companys future performance. Within the organization, every decision taken is after weighing the pros and cons of such a decision-making taking note of the risk attributable.

Your Company has established a guideline to inform board members about the risk assessment and mitigation process. The Company manages, evaluates, and reports on the major risks and uncertainties that may jeopardize its ability to meet its strategic goals. The Companys Risk

Management Policy focuses on identifying, assessing, and managing risks related to the Companys assets and property, Employees, Foreign Currency Risks, Operational Risks, Non-compliance with statutory enactments, Competition Risks, and Contractual Risks.

F. HUMAN RESOURCE

The Company holds its skilled and trained workforce in high esteem, recognizing them as indispensable for achieving organizational goals. A commitment is made to not only maintain but also enhance their capabilities, ensuring they remain aligned with the ever-evolving technological landscape. During the year under review, the Company undertook a variety of training initiatives covering a wide spectrum of topics. These encompassed technical competencies crucial for operational excellence, programs aimed at fostering positive behavioral traits, workshops focusing on enhancing business acumen, as well as both general and advanced management principles. Leadership training was provided to cultivate effective decision-making and team management skills. Customer-centric training was prioritized to uphold service standards, while safety protocols were reinforced to ensure a secure work environment. The Company emphasized the importance of values and ethical conduct, instilling a sense of integrity and responsibility across all levels of the workforce.

RELATION FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYEE

The employees are satisfied and having good relationship with the Management. Your Company values each employee, supports them, and strives to provide opportunities based on their skill sets, resulting in mutually beneficial relationships between the company and its employees. Your Company has developed a policy that increases employee job satisfaction while simultaneously increasing production.

INTERNAL CONTROL SYSTEMS

Your Company has an internal control system that is suitable to the characteristic and scale of its operations and that efficiently and efficiently addresses all aspects of the business and functional departments.

The framework encompasses a compliance management team with established policies, norms, and procedures, as well as applicable statutes, rules, and regulations, as well as an inbuilt system of checks and balances, to ensure that appropriate and prompt corrective actions are taken in the event of any discrepancies from the defined standards and parameters. Internal control systems are examined on a regular basis for effectiveness and deliverability, so that any necessary precautions to reinforce them can be undertaken in response to changing company requirements. Your Company conducts ongoing reviews of its systems, procedures, and controls, comparing and aligning them with industry standards.

SENIOR MANAGEMENT PERSONNEL WITH THE COMPANYS CODE OF CONDUCT

This is to confirm that the Company has adopted a Code of conduct for its employees including the Director.

I confirm that the Company has in respect of the Financial Year ended 31^st March, 2024, received from the Senior Management team of the Company and the members of the Board, a declaration of Compliance with the code of Conduct as applicable to them.

I. DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 133 of the Companies Act, 2013 ("the 2013 Act") and the relevant provisions of the 2013 Act, as applicable. The financial statements have been prepared on going concern basis under the historical cost convention on accrual basis. The Company has follows to continue with the period of 1^st day of April to 31^st day of March, each year as its financial year for the purpose of preparation of financial statements under the provisions of Section 2(41) of the Companies Act, 2013.

J. CAUTIONARY STATEMENT

The management discussion and analysis report containing the Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors such as changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.