Directors Report of Northern Arc Capital Ltd.

Mar 31, 2025

Your directors have pleasure in presenting this board report along with the audited financial statements of the Company for the financial
year ended March 31, 2025 ("year under review”).

FINANCIAL HIGHLIGHTS:

The Key highlights of the audited financial statements are presented in the below table:

Particulars	Standalone		Consolidated
	Year ended 31-Mar-25	Year ended 31-Mar-24	Year ended 31-Mar-25	Year ended 31-Mar-24
Total income	2,296.51	1,844.32	2,355.74	1,906.03
Finance costs	822.86	725.86	828.36	726.39
Net interest income	1,473.65	1,118.46	1,527.38	1,179.64
Operating expenses	638.09	605.23	716.55	619.06
Depreciation	15.31	14.67	17.88	16.94
Pre-provision profit	820.25	498.56	792.95	543.65
Impairment and write-offs	378.53	123.14	404.85	122.44
Share of loss from associates	0	0	2.02	0.97
Profit before tax	441.72	375.42	386.08	420.24
Tax expense	99.10	95.25	84.76	102.54
Profit for the period	342.62	280.17	301.32	317.69
Other comprehensive income/(loss)	(29.01)	19.32	(29.30)	20.25
Total comprehensive income	313.61	299.49	272.02	337.95
Total comprehensive income to Owners	313.61	299.49	275.28	328.50
Opening balance of retained earnings	902.85	677.18	960.35	698.99
Transfer to reserves	(68.52)	(56.03)	(68.52)	(56.03)
Appropriations and other adjustments	0.47	1.53	(0.42)	9.06
Closing balance of retained earnings	1,177.42	902.85	1,195.95	960.35
Earnings per Equity share:
Basic (in INR)	22.59	31.45	20.08	34.61
Diluted (in INR)	22.53	21.26	20.03	23.40

FINANCIAL PERFORMANCE:

During the year ended March 31, 2025, on a standalone
basis, your company generated total income of INR
2,296.51 crore, a growth of 24.52% over the earlier
year. Net Interest Income was INR 1,473.65 crore,
representing year-on-year increase of 31.77%.

On a consolidated basis, your company generated total income of
INR 2,355.74 crore, a growth of 23.59% over the earlier year. Net
Interest Income was INR 1,527.38 crore, representing year-on-
year increase of 29.48%.

There is no change in the nature of business of the Company for the
year under review. Further information on the business overview

and outlook and state of the affairs of the Company is mentioned in
detail in the Management Discussion and Analysis Report.

SHARE CAPITAL:

Authorized Share Capital:

The authorized share capital of the Company is INR 282,00,00,000/-
(Rupees Two Hundred and Eighty Two crore only) divided into
16,50,00,000/- equity shares of INR 10/- each and 5,85,00,000
compulsorily convertible preference shares of INR 20/- each.

Issued, Subscribed and paid-up share capital:

During the financial year, your company had allotted 3,11,966
equity shares under the Employees Stock Option Schemes
of the Company.

On April 22, 2024, your company had allotted compulsorily
convertible preference shares ("CCPS”) to the following investors:

S No	Name of the Investor	No. of CCPS
1	International Finance Corporation	8,491,048
2	RJ Corp Limited	639,386
3	Varun Jaipuria	639,386

Your Company had allotted 5,26,16,624 fully paid-up Equity shares
of INR 10 each on August 09, 2024 upon conversion of all the
existing CCPS issued by the Company. Further, your company had
allotted 1,90,65,326 Equity shares on September 20, 2024 through
the initial public offering of its Equity Shares.

After the allotment of the aforesaid equity shares and conversion
of CCPS into equity shares, the total issued, subscribed and
paid-up capital of the Company as on March 31, 2025 stood at
INR 1,61,37,93,360/- comprising of 16,13,79,336 equity shares
of INR 10 each.

Initial Public offer:

During the year under review, the Company successfully completed
its Initial Public Offering (IPO) aggregating to INR 777 crore in
September 2024. The IPO comprised a fresh issue of 1,90,65,326
equity shares, raising INR 500 crore, and an Offer for Sale (OFS)
of 1,05,32,320 existing equity shares amounting to INR 277 crore.
The equity shares of the Company were listed on both the National
Stock Exchange of India Limited (NSE) and BSE Limited (BSE) and
trading of the equity shares commenced on September 24, 2024.

DIVIDEND:

Due to the requirement of deploying the funds back into the
business for the growth of your Company, your directors have not
recommended any dividend for the year under review.

DIVIDEND DISTRIBUTION POLICY:

Since your Company is one of the top 1000 listed Companies as per
market capitalisation as on 31st March, 2025 and in accordance
with the Regulation 43A of Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations,
2015, the Company has formulated and adopted a Dividend
Distribution Policy, which was reviewed and approved by the
Board and the same is available on the website of the Company at
https://www.northernarc.com//assets/uploads/policies/Dividend
Distribution Policy.pdf

DEBENTURE:

During the year under review, your company had allotted 62,000
Senior, Secured, Rated, Listed, Redeemable Non-convertible
debentures of face value of INR 1,00,000/- amounting to INR 620
crore on 14th June 2024 and 5,000 Senior, Secured, Rated, Listed,
Redeemable Non-Convertible Debentures of face value of INR
1,00,000/- amounting to INR 50 crore on 13th August 2024.

TRANSFER TO STATUTORY RESERVES

Your Company has transferred an amount of INR 68.52 crore to the
statutory reserves in accordance with the requirements of Section
45-IC (1) of the Reserve Bank of India Act, 1934.

CREDIT RATING

The Credit ratings of the company as on March 31, 2025, are summarised below:

Instrument	Rating Agency	Rated Amt (In Crs)	Rating
Commercial Paper	ICRA	35	ICRA A1
	CARE	500	CARE A1 (One Plus)
Secured NCD under Private Issue	ICRA	872.90	ICRA AA- (Stable)
	India Ratings	126.39	IND AA- (Stable)
Term Loan from Banks	ICRA	7,234.00	ICRA AA- (Stable)

CAPITAL ADEQUACY

The Company''s capital adequacy ratio as of March 31, 2025, was
24.72% as against 18.26% as at March 31, 2024. The minimum
capital adequacy ratio prescribed by Reserve Bank of India is 15%.

NOMINATION AND REMUNERATION POLICY

The Company has formulated Nomination and Remuneration Policy
under the provisions of section 178 of the Act and SEBI Listing
Regulations and RBI (Non-Banking Financial Company - Scale
Based Regulation) Directions, 2023 dated October 19, 2023 and the
same is uploaded on the website of the Company at https://www.
northernarc.com//assets/uploads/policies/Nomination and
Remuneration Policy.pdf

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The composition of the Board of Directors of the Company is
in accordance with the provisions of section 149 and 165 of the
Companies Act, 2013 read with Regulation 17 of the SEBI Listing
Regulations with an appropriate combination of Executive Director,
Non-Executive Directors and Independent Directors.

As on March 31, 2025, the Company has eight Directors of which
seven are Non-Executive Directors including Two (2) women
Directors. The Company has Three (3) Independent Directors one
of whom is a Woman Independent Director.

Pursuant to the provisions of Section 152 of the Companies Act,
2013, Mr. Michael Jude Fernandes (DIN: 00064088), retires by
rotation and being eligible, offers himself for re-appointment. The
resolutions seeking shareholders'' approval for his re-appointment
forms part of the AGM Notice.

During the year under review, Ms. Monika Gurung was ceased to
be the Company Secretary and Compliance Officer and Mr. Prakash
Chandra Panda has been appointed as the Company Secretary and
Compliance Officer of the Company with effect from April 22, 2024.

Dr. Kshama Fernandes, is a Non-Executive Non-Independent
Director, who was initially appointed to the Board as Executive
Director with effect from August 1, 2012, and was re-designated
as Non-Executive Non-Independent Director and Vice-Chairperson
of the Company with effect from April 1, 2022. Pursuant to SEBI
notification dated June 14, 2023 read with regulation 17(1D)
of the SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015, as amended (''SEBI Listing Regulation'') effective
from July 15, 2023, the Board at its meeting held on August 06,
2024 and the shareholders at their meeting held on December 19,
2024 had approved the continuation of Dr. Kshama Fernandes as
a Vice-Chairperson (Non-Executive Non-Independent Director) of
the Company for a further period of one year till March 31, 2025.

The Board at its meeting held on February 14, 2025, and the
shareholders through postal ballot resolutions dated May 05,
2025, had approved the continuation of Dr. Kshama Fernandes as
a Non-Executive Non-Independent Director of the Company for a
further period of one year with effect from April 01, 2025.

During the year under review, Mr. N T Arunkumar ceased to be
Director of the Company w.e.f. February 13, 2025 upon completion
of his term as an Independent Director. The Board places on record
its appreciation for their invaluable contribution and guidance
provided to the Company.

Based on the recommendation of the Nomination and
Remuneration Committee, the Board of Directors of the Company
in its meeting held on May 07, 2025 has approved the appointment
of Mr. Sandeep Dhar (DIN: 00182797) as the Additional Director
(Non-Executive, Independent) of the Company for a period of 5
consecutive years with effect from May 07, 2025, subject to the
approval of shareholders.

Mr. Trikkur Seetharaman Anantharaman (DIN: 00480136) resigned
as the Non-Executive Nominee Director of the Company with effect
from June 23, 2025, representing 360 One Special Opportunities
Fund, subsequent to the sale of its stake in the Company.

During the year, Mr. Ashish Mehrotra, Managing Director & CEO,
Mr. Atul Tibrewal, Chief Financial Officer, Ms. Monika Gurung,
Company Secretary and Compliance Officer (upto April 22,
2024) and Mr. Prakash Chandra Panda, Company Secretary and
Compliance Officer (effective April 22, 2024) of the Company have
been designated as the Key Managerial Personnel of the Company
(KMP) pursuant to the provisions of Sections 2(51) and 203 of the

Companies Act, 2013 read with the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014.

CORPORATE GOVERNANCE:

The Corporate Governance report which forms a part of Board''s
Report which states that a detailed Company''s corporate
governance practices, together with the certificate from the
secretarial auditors confirming compliance, as per the SEBI
Listing Regulations.

A certificate from the Secretarial auditors of the Company
regarding compliance of conditions of corporate governance is
annexed to this report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY
REPORTING (‘BRSR''):

Pursuant to Regulation 34(2)(f) of SEBI (LODR) Regulations, 2015,
the top one thousand listed entities based on market capitalisation
shall submit a Business Responsibility and Sustainability report in
the format as specified by the SEBI from time to time. Since your
Company is one of the top 1000 listed Companies as per market
capitalisation as on March 31, 2025, the Annual Report includes
a separate report on the BRSR, which outlines the Company''s
environmental, social and governance initiatives.

CORPORATE SOCIAL RESPONSIBILITY (CSR):

The brief outline of the Corporate Social Responsibility (CSR)
initiatives undertaken by the Company on CSR activities during
the year under review are set out in Annexure A of this report
in the format prescribed in the Companies (Corporate Social
Responsibility) Rules, 2014. The CSR Committee has formulated
and recommended to the Board, a Corporate Social Responsibility
Policy ("CSR Policy”) indicating the activities to be undertaken by
the Company, which has been approved by the Board. The CSR
Policy is available on the Company''s website at https://www.
northernarc.com//assets/uploads/policies/CSR Policy.pdf

RBI GUIDELINES:

The Reserve Bank of India (RBI) granted the Certificate of
Registration to the Company in March 2018 under Registration No
B-07.00430, authorizing it to operate as a non-banking financial
institution without accepting public deposits. Your Company is
categorised as NBFC in Middle layer pursuant to Master Direction
- Reserve Bank of India (Non-Banking Financial Company -
Scale Based Regulation) Directions, 2023 and has complied with
and continues to comply with all the applicable regulations and
directions of the RBI.

DISCLOSURES OF AGREEMENTS BINDING THE LISTED
ENTITY:

The disclosure of agreements binding the listed entity are provided
in the Corporate Governance Report.

DETAILS OF UTILISATION OF FUNDS RAISED
THROUGH PREFERENTIAL ALLOTMENT OR
QUALIFIED INSTITUTIONS PLACEMENT AS SPECIFIED
UNDER REGULATION 32(7A) OF SEBI (LISTING
OBLIGATIONS AND DISCLOSURE REQUIREMENTS)
REGULATIONS, 2015:

The disclosure of utilization of funds raised through preferential
allotment or qualified institutions placement are provided in the
Corporate Governance Report.

EMPLOYEES STOCK OPTION SCHEME:

The Company had formulated the Northern Arc Employee Stock
Option Plan, 2016 (ESOP Plan), duly approved by the shareholders
of the Company to enable its employees to participate in the
future growth and financial success of the Company. The Company
also intends to use this ESOP Plan to attract and retain talent in
the organisation.

The ESOP Plan was formulated and amended in accordance with
the SEBI guidelines and the eligibility and number of options to
be granted to an employee is determined on the basis of various
parameters such as scale, designation, performance, grades, period
of service, criticality and such other parameters as may be decided
by the Nomination & Remuneration Committee of the Board from
time to time in its sole discretion.

The Shareholders of the Company had approved the ESOP Plan on
October 07, 2016. During the year under review, the ESOP Plan
was amended vide special resolution passed by the members in
their Extra Ordinary General Meeting on July 02, 2024 by increase
of pool to 90,07,758 options. Subsequently, post listing of equity
shares of the Company on September 24, 2024, in BSE and NSE,
in compliance with the regulatory requirements in terms of the
Securities and Exchange Board of India (Share Based Employee
Benefits and Sweat Equity) Regulations, 2021, the ESOP Plan
was ratified by the members vide special resolution passed in the
General meeting held on December 19, 2024.

During the year under review, 3,11,966 equity shares of face value
of INR 10 each were allotted to employees pursuant to exercise of
stock options by the employees of the Company under ESOP Plan.

During the year under review, there were no material changes
to the ESOP Schemes, except for modifications made to comply
with the regulatory requirements under the SEBI (Share Based
Employee Benefits and Sweat Equity) Regulations, 2021 ("SBEB
& SE Regulations”). These changes are not prejudicial to the
interest of the employees. The ESOP Schemes remain fully
compliant with the SBEB & SE Regulations. Additionally, all
statutory disclosures required under Regulation 14 of the SBEB &
SE Regulations and Rule 12 of the Companies (Share Capital and
Debentures) Rules, 2014 are available on the Company''s website at
https://www.northernarc.com/annual-rRport.

DECLARATION OF INDEPENDENCE UNDER SECTION
149(6) OF THE COMPANIES ACT, 2013

The Independent Directors of the Company have submitted a
declaration that each of them meets the criteria of independence
as provided in Section 149(6) of the Companies Act, 2013 along
with Rules framed thereunder and Regulation 16(1)(b) of the
SEBI Listing Regulations and there has been no change in the
circumstances which may affect their status as independent
director during the year.

The Independent Directors have confirmed that they are not aware
of any circumstance or situation, which exists or may be reasonably
anticipated, that could impair or impact their ability to discharge
their duties with an objective independent judgment and without
any external influence.

In the opinion of Board, all the Independent Directors are
possessing integrity, expertise and experience (including the
proficiency) in their respective domains.

Pecuniary Transactions with non-executive directors

Details of remuneration to non-executive directors are provided in
the Corporate Governance Report.

SUBSIDIARIES AND ASSOCIATES:

Your Company has 5 subsidiary companies, i.e., Northern Arc
Investment Managers Private Limited; Pragati Finserv Private
Limited, Northern Arc Foundation (a company incorporated under
section 8 of the Act), Northern Arc CrediTech Solutions Private
Limited (Formerly known as Northern Arc Investment Adviser
Services Private Limited) and Northern Arc Securities Private
Limited and one (1) associate company, i.e., Finreach Solutions
Private Limited, as on March 31, 2025.

On May 12, 2025, the Company has diluted its stake in FinReach
Solutions Private Limited from 24.55% to 11.16%. As a result,
FinReach Solutions Private Limited ceased to be an associate of the
Company effective May 13, 2025.

The name of Northern Arc Investment Adviser Services Private
Limited was changed to Northern Arc CrediTech Solutions Private
Limited with effect from May 27, 2025.

Information on the performance and financial position of the
subsidiaries and associate company as on March 31, 2025 are
provided in form AOC 1 enclosed as Annexure - B.

The details of subsidiaries and associate are as follows:

(i) Northern Arc Investment Managers Private Limited
(NAIM)

A Decade of Purpose, Powered by Performance:

Over the last decade, Northern Arc Investment Managers
Private Limited (NAIM) has carved a distinctive path in
India''s private credit landscape. Born as a niche platform
in FY 2013-14 with a vision to bridge the yawning credit

gap for mid-market enterprises, we have evolved into a
pioneering fund management institution with a reputation
for innovative, structured, and impact-aligned debt solutions.

We began our journey with a ^100 crore microfinance-
focused fund. Today, we manage ^3,152 crore in AUM across
six active funds and 2 PMS strategies. Behind these numbers
lies a deeper story of resilience, relevance, and relentless
pursuit of financial inclusion and sustainable returns.

Our investment philosophy integrates two powerful engines:

Performing Credit: Delivering strong risk-adjusted
returns through disciplined underwriting and robust
portfolio construction.

? Impact Investing: Catalyzing real-world change by
directing capital to enterprises often overlooked by
formal finance early-stage, undercollateralized, or high-
potential businesses driving inclusive growth.

This dual-lens approach financial rigor fused with social
purpose has enabled us to deliver a weighted average XIRR of
14.57% across matured funds, all without a single instance of
capital loss for our esteemed underlying investors.

A Platform Built on Scale, Trust, and Innovation

Our growth journey is defined by diversification, governance,
and track record:

? 14 investment products launched to date 12 AIFs and 2
discretionary PMS mandates.

? 6 funds successfully closed, all delivering ahead of
target returns.

? Cumulative deployment exceeding ^12,000 crore.

? Over 1000 unique investors served, spanning HNIs,
corporates, family offices, DFIs, and offshore investors.

? In all exited funds, Zero capital loss to ay underlying
investors. No fund extension. 100% on-time
distributions over the last decade.

Our offerings span a broad spectrum from open-ended
Category III funds and Cat II debt structures to bespoke
accounts through PMS strategies, leveraged fund strategy,
and offshore solutions, including our landmark GIFT City
platform for global investors.

FY 2024-25: Consolidation, Innovation, Momentum

This fiscal year marked a strategic inflection point
in our journey.

? 6 active funds under management, with strong inflows
across all strategies.

? Raised over ^200 crore for the Northern Arc Finserv
Fund, nearing its final close.

? Landmark offshore raise of ^245 crore from DFC,
doubling our offshore footprint.

? ^520 crore in the pipeline for our upcoming leveraged
GIFT City fund, the Northern Arc Blue Horizon Fund.

? Four new AIFs launched, reinforcing our ambition
to lead across risk-return spectra from stable
performing credit to selective special situations and
asset-backed lending.

Looking Ahead: The Decade of Global Credit Leadership

We now stand on the cusp of an exciting future one that goes
beyond managing capital to mobilizing transformation.

Our vision for the next decade is clear: for India bound
global credit assets, we aspire to become their gateway to
India, and for domestic investors, we plan to be a preferred
and reliable credit solutions provider. We aspire to redefine
credit fund management in India by setting new standards
in transparency, diversification, credit governance, and
purpose-driven investing.

Strategic Priorities for the Future:

1. Deepen Core Strengths

? Expand in performing credit through diversified,
sector-specific funds with gross return targets
across 10%, 12.5%, 15%, and 17.5%.

? Explore measured entry into special situations
and asset-backed finance, while steering clear of
distressed and real estate exposure.

2. Amplify Impact

? Double down on impact-oriented funds in financial
inclusion, MSME lending, education, healthcare,
clean energy, and sustainable livelihoods.

3. Go Global

? Build offshore investor access through GIFT
City, with leveraged fund structures tailored for
international LPs.

? Strengthen institutional ties, following our
breakthrough collaboration with DFIs and larger
offshore investors.

4. Fuel Innovation & Resilience

? Leverage tech-enabled credit underwriting and
ESG-aligned monitoring.

? Invest in internal capabilities for more agile, data-
driven investing with global relevance.

Final Word: From Credit Capital to Capital for Change

At NAIM, credit is not merely a product it is an enabler of
growth, resilience, and empowerment. As a platform, we are
uniquely positioned at the intersection of financial markets,
real economy enterprises, and impact-driven capital.

Our investors place their trust in us for one reason we don''t
just promise yield, we deliver certainty, integrity, and purpose.

As we begin this new chapter, we carry forward a powerful
legacy—and an even more powerful ambition: to scale
with integrity, to perform with conscience, and to become
a globally admired credit institution where impact is not a
trade-off, but a multiplier.

(ii) Pragati Finserv Private Limited (Pragati Finserv)

Pragati Finserv the rural Finance subsidiary of Northern
Arc Capital was incorporated in FY 2020-21 to offer small
ticket loans to under-served rural and semi-urban areas
of the country. Pragati Finserv serves the diverse needs of
customers belonging to low-income households of rural and
semi-urban areas. It aims to become a one stop lending shop
for its borrowers covering income-generating micro loans
and household loans.

The current product offering of Pragati Finserv is Krushi
JLG loan for rural women customers with a ticket size of
INR 30,000 to 75,000. Pragati Finserv has 287 operational
branches across 8 states and 1 UT. During the FY 2024-25,
15 New branches have been inaugurated in the unpenetrated
districts of south Tamil Nadu.

As of March 31, 2025 the Portfolio Outstanding of Pragati
Finserv is 1032 crore with 3.91 lakh Active Clients and
4.03 lakh Active Loans. The DPD 90-180 portfolio of Pragati
Finserv is INR 45.18 crore which is 4.38% of the total
portfolio outstanding.

The Microfinance industry has faced severe headwinds
during the FY 2024-25 led by multiple factors resulting in
14% drop in AUM and 45% decline in disbursements. Due
to the increasing defaults in the industry the Microfinance
SRO''s (Self-Regulatory Organisations) MFIN and Sa-Dhan
have introduced Guardrails to minimise the impact. The
Guardrails had a sudden impact on the cash flow of the
customers leading to even higher defaults in the short term.

1. Severe Climatic conditions like floods, heatwaves and
cyclones etc - Tamil Nadu, UP, Bihar and Jharkhand are
among states impacted due to these climatic conditions

2. Operational challenges including Multiple KYC''s,
limited data for cashflow/income assessment, low
centre attendance and increasing door-step collections

3. Borrower Overleveraging - Increasing number of
lenders and overall indebtedness are the major reason

forcnstomerstressanddefanlts

a. Pragati Finserv has given Loans to only 4.2%
clients who were having 5 or more lenders at the
time of disbursement; the number of clients with
5 or more lenders as on March 2025 was 15.7%

b. Pragati Finserv has given Loans to only 0.05%
clients who were having 2 Lakhs or more total
outstanding at the time of disbursement; the
number of clients with 2 lakhs or more outstanding
as on March 2025 was 8%

c. With the introduction of Guardrails from SRO''s
the indebtedness is under control with clients
having 5 more clients coming down from 26% in
June 2024 to 16% in March 2025

4. Socio Political Factors including the Karnataka

Ordinance & karza Mukti Abhiyan

a. The Karnataka microfinance crisis which started
in Tumkur and Mandya spread across all the
districts which in a short period of time.

b. With the increasing number of cases and
complaints, a media uproar started in the last
week of January

c. The Government of Karnataka brought

an ordinance in February to control the
unregulated lenders and control any coercive
practices on the field

d. The crisis impacted the collections in Karnataka
for lenders including Pragati which was having a
significant share in the state.

e. Due to the continuous trainings and stakeholder
engagements there were no Police cases on
employees of Pragati in Karnataka

f. The Karza Mukti movement has impacted
the collections in and around branches of
Gorakhpur districts.

Pragati Finserv has developed and implemented several

Practices and processes to ensure maximum collections.

1. Pragati Finserv has introduced a "Family Connect”
program where the field managers visit the
field employee''s family at their house. This has
increased the employee morale.

2. Pragati Finserv has 41 training centres across the
country to train its employees

3. Started printing centralised Loan Cards with
enhanced security features and QR codes to
achieve One of the Best Digital collections of 33%
for march 2025 with no intermediaries or CSP''s

4. Started a Tele Calling team from corporate office
to all new disbursements, missed collections
clients and PAR clients

5. Gave the field team a "Collection Planner” tool to
plan their daily activity

6. Developed Collection Modules with OD/Missed
collections details, Centre Monitoring and
Client Visit Reports

7. Through our Centre Monitoring Module, the
field managers are visiting more than 14,000
centres monthly

8. Each OD client is visited 2.5 times on average
during the month through the Client Visit Report

9. Strengthened the "Customer Grievance Redressal
Mechanism” by providing the required details on
the loan card, Website, SMS and Branch. We have
received over 3000 calls of which 2913 have been
addressed successfully with a TAT of 8 days.

During the FY 2024-25, Pragati Finserv has disbursed
1,40,690 loans with a value of 702 crore. The approval
rate has dropped from more than 40% to below 20%
due to the tighter underwriting norms, Guardrails and
increasing defaults in the market. Focus on disbursing
higher ticket loans to fewer customers with good
repayment track record; increased the average loan
ticket size from 48,000 to 51,000.

There are a total of 2,014 active employees in Pragati
with 1,738 filed employees (Loan Officers and Branch
Managers). Loan Officer Productivity stands at 277
clients and 73 lakhs while the branch productivity
stands at 1,364 customers and 3.60 crore. Pragati
Finserv has better in all productivity parameters
compared to the average medium size MFi''s.

Technology is the backbone of Pragati Finserv and is the
key differentiator for our organization to grow. During
the FY Pragati has developed Aryabhatta 3.0, our new
LOS system built with a simpler workflow and front-end
risk controls. The new application has reduced the Loan
Officer application TAT to below 30 minutes. Developed
a new QC and Credit underwriting web application
Dhruva2.0 with Video PD capability for better decision
making. Started implementing End Point Security, Patch
Management & CIS benchmarks along with conducting
VAPT (Vulnerability Assessment and Penetration
Testing) for better information security. Received MFR
"Gold Certification” by achieving a score of 97.2%.

Pragati Finserv being the Multi-Lingual and Multi¬
Cultural company, people are at the centre of all the
decision-making policies. We have conducted our Third
Strategy and Planning workshop "SANKALP” and the

regional CEO Interface "SAMPARK” for aligning the team
towards a common objective. INR 11.45 Lakhs spent
on CSR activities through Northern Arc Foundation for
the FY 2024-25.

(iii) Northern Arc Foundation ("NAF")

Northern Arc, beyond the regulatory compliance, believes in
giving back to the community and has embraced Corporate
Social Responsibility (CSR) to make a meaningful and
significant contribution to promote sustainable community
development. The company has a strong commitment
towards long term value creation through its social
investing; in recognition of which has established NAF to
implement CSR interventions for the group companies.
NAF has been dedicated to making social investment for
sustainable outcomes across the nation where Northern Arc
has its presence. The areas where NAF makes significant
contribution in FY 2024-25 are Education, Environment &
Sustainability, and Healthcare & Destitute Care.

For FY 2024-25, the CSR budget of Northern Arc Capital
Limited amounted to ^6,09,07,000, of which 44% was
allocated towards Environment & Sustainability focused
projects, 25% directed towards Education-related programs,
and 31% was towards Health & Destitute Care initiatives.

(iv) Northern Arc CrediTech Solutions Private Limited

In alignment with the commitment to innovation and growth
in the evolving financial landscape, Northern Arc CrediTech
Solutions Private Limited (Formerly known as Northern Arc
Investment Adviser Services Private Limited) (NACT) has
strategically shifted its focus from being a SEBl-registered
Investment Adviser to providing advanced technological
solutions in credit delivery and management. In line with this
swift, NACT has voluntarily surrendered its SEBl Investment
Adviser Registration Certificate (Reg No: 1NA200000019),
leading to its cancellation by SEBl effective January 3,
2025 and the company has been renamed as Northern Arc
CrediTech Solutions Private Limited effective, May 27, 2025.

(v) Northern Arc Securities Private Limited (NAS)

NAS is emerging as a comprehensive wealth management
platform, offering a diverse suite of investment products
tailored to meet the evolving needs of retail, HNl, and
institutional clients. With a strong foundation in fixed-
income expertise, the platform has expanded to provide a
holistic financial ecosystem—encompassing bonds, mutual
funds, fixed deposits, insurance products, and curated
wealth solutions.

The business continues to be guided by a client-centricity,
with a focus on transparent communication, product
suitability, and goal-oriented advisory. Leveraging Northern
Arc''s deep credit heritage and robust due diligence
frameworks, the platform ensures that every investment

product is carefully evaluated for risk and aligned with
clients'' financial objectives.

During the year, NAS made significant strides in broadening
of distribution capabilities, onboarding new partners, and
enhancements to the digital interface. The product strategy
has been broadened to encompass debt, equity, protection,
and savings solutions enabling clients to build diversified
portfolios under a single platform.

Looking ahead, NAS remains committed to delivering long¬
term value, combining innovation in financial products
with trusted relationships, thereby redefining the wealth
experience for Indian investors.

(vi) Finreach Solutions Private Limited (Finreach)

Finreach aims to improve access to credit for unserved/
underserved but viable Micro, Small & Medium Enterprises/
Entrepreneurs (MSMEs). The Company offers a wide
range of services to financial institutions to help expand
their geographical footprint, product offerings and
portfolio of assets.

FIXED DEPOSITS

The Company being non-deposit taking Non-Banking Financial
Company - Investment and Credit Company (NBFC-ICC), has not
accepted any deposits during the year under review. Further,
the Company had also passed a board resolution to the effect
that the company has neither accepted public deposit nor would
accept any public deposit during the year under review, as per
the requirements of Master Direction - Non-Banking Financial
Companies Acceptance of Public Deposits (Reserve Bank)
Directions, 2016.

FOREIGN EXCHANGE EARNINGS AND OUTGO

There were no foreign exchange earnings during the year or the
previous year. Total foreign exchange outgo during the year under
review was INR 62.02 crore (previous year: INR 46.02 crore) under
the heads listed below:

Head of Expense	March 31, 2025	March 31, 2024
Subscription charges	0.17	0.05
Legal and professional charges	13.08	3.79
Directors'' sitting fees	0.05	0.20
Finance cost	48.72	41.97
Total	62.02	46.02

MEETING OF INDEPENDENT DIRECTORS

In terms of Para VII of Schedule IV of the Companies Act, 2013, your
Company conducted a meeting of its Independent Directors on
March 28, 2025, without the presence of Non Independent Directors
and Executive Directors. The Independent Directors inter alia,:

a) reviewed the performance of Non Independent Directors and
the Board as a whole.

b) reviewed the performance of the Chairperson of the company,
taking into account the views of Executive directors and Non
- Executive directors.

c) assessed the quality, quantity, and timeliness of flow of
information between the company management and the
Board that is necessary for the Board to effectively and
reasonably perform their duties.

AUDITORS:

STATUTORY AUDITORS

In terms of Section 139 of the Companies Act, 2013 and the rules
made thereunder, the Shareholders in the 16th Annual General
Meeting had appointed M/s. Walker Chandiok & Co LLP, Chartered
Accountants, having ICAI Firm Registration No.: 001076N/
N500013 as statutory auditors of the Company for a period 3
(three) consecutive terms, to hold office from the conclusion of
16th Annual General Meeting till the conclusion of 19th Annual
General Meeting.

There has been no qualification, reservation or adverse
remark given by the Statutory Auditors in their Report for the
year under review.

SECRETARIAL AUDITORS

Pursuant to provisions of Section 204 of the Companies Act,
2013 and The Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, the Company had appointed
M.Damodaran & Associates LLP, Practicing Company Secretaries
to undertake the Secretarial Audit of the Company during the
year under review. The Report of the Secretarial Audit Report is
annexed herewith as "Annexure C". The Secretarial Audit Report
for the financial year ended March 31, 2025 does not contain
any qualification, reservation or adverse remark in their report.
However, there are certain observations which states that there is
a delay in filing under SEBI LODR Regulations and SEBI Circular
No. SEBI/HO/DDHS/PoD1/P/CIR/2023/119 dated August 10,
2021. The Secretarial observations are noted by the management
and had taken necessary steps to ensure timely compliance under
applicable SEBI LODR Regulations and SEBI Circular No. SEBI/HO/
DDHS/PoD1/P/CIR/2023/119 dated August 10, 2021.

Pursuant to Regulation 24A(1)(b) of SEBI LODR Regulations, the
Company is required to appoint the secretarial auditors for a term
of 5 consecutive years. In this regard, based on a review of the

profile, including the size, experience and area of specialization and
recommendation of the Audit Committee, the Board at its meeting
held on May 19, 2025 inter-alia, approved and recommended for
the approval of the members, the appointment of M/s. Alagar &
Associates LLP (Formerly known as M. Alagar & Associates),
Practicing Company Secretaries, Chennai (Firm Registration No.
L2025TN019200) as the secretarial auditors from the conclusion
of the 17th AGM until the conclusion of the 22nd AGM for the
purpose of secretarial audit of the Company.

COST RECORDS AND COST AUDITORS

The provisions of Cost Audit and Records as prescribed under
Section 148 of the Act, are not applicable to the Company.

REPORTING OF FRAUDS BY THE AUDITORS TO THE
COMPANY

During the year, the Auditors have not reported any instance of
fraud to the Audit Committee and Board as per Section 143 (12) of
the Companies Act, 2013.

COMPLIANCE

Your Company is registered with Reserve Bank of India under
Section 45IA of the Reserve Bank of India Act, 1934. Further,
your Company has complied with and continues to comply with
all applicable laws, rules, circulars and regulations applicable
to the Company.

CHANGES TO THE CONSTITUTIONAL DOCUMENTS
DURING THE YEAR UNDER REVIEW

a. Memorandum of Association:

The Company at its Extra-ordinary general meeting held on
September 16, 2024 approved the increasing of authorized
share capital of the Company from INR 2,77,00,00,000/-
(Two Hundred Seventy Seven Crore Only) divided into

16.00. 00.000 equity shares of INR 10/- each and 5,85,00,000
compulsorily convertible preference shares of INR 20/- each
to INR 2,82,00,00,000 (Two Hundred and Eighty Two Crore
Only) divided into 16,50,00,000 equity shares of INR 10/-
each and 5,85,00,000 compulsorily convertible preference
shares of INR 20/- each by creation of additional Equity Share
capital of INR 5,00,00,000 ( Rupees Five Crore) divided into

50.00. 000 (Fifty Lakh ) Equity Shares of the face value of INR
10/- (Rupees ten) each, ranking pari-passu in all respects
with the existing equity shares of the Company.

b. Articles of Association:

The Articles of Association has been amended by the Company
to incorporate the terms of the amended shareholder''s
agreement dated February 2, 2024 by inserting the terms
and conditions of the compulsorily convertible preference
shares with respect to new Series C CCPS and Series C2 CCPS

vide special resolutions passed by the members at its Extra¬
ordinary general meeting held on April 15, 2024.

The Articles of Association are divided into Parts I and II which
parts shall, unless the context otherwise requires, co-exist with
each other, until the date of filing of the Red Herring Prospectus.
In this regard, Part II has been terminated automatically and
cease to be in force and effect from September 09, 2024 i.e.,
the date of filing of the Red Herring Prospectus and Part I shall
continue be in force and effect, without any further action by
the Company or its shareholders.

The Articles of Association has been amended by the
Company vide special resolutions passed by the members at
its Annual General Meeting held on December 19, 2024 by
insertion of new clause 103A of the Articles of Association
which enables each shareholder of the Company is permitted
to nominate Directors to the Board in accordance with the
threshold as set out in the Amended Articles of Association
of the Company.

MATERIALCHANGES AND COMMITMENTSAFFECTING
THE FINANCIAL POSITION OF THE COMPANY THAT
OCCURRED BETWEEN THE END OF THE FINANCIAL
YEAR TO WHICH THIS FINANCIAL STATEMENT
RELATE TILL THE DATE OF THIS REPORT:

No material changes and commitments affecting the financial
position of the Company have occurred between the financial year
ended 31st March 2025 till the date of this report.

PARTICULARS OF LOANS, GUARANTEES OR
INVESTMENTS IN SECURITIES

In terms of Rule 11(2) of the Companies (Meetings of Board and
its Powers) Rules, 2014, NBFCs are excluded from the applicability
of Section 186 of the Act, 2013, where the loans, guarantees and
securities are provided in the ordinary course of its business.

Details of investments under Section 186 of the Act, 2013 for the
financial year 2024-25 are provided in the financial statements.

BOARD AND COMMITTEE MEETINGS

During the financial year 2024-25, 18 meetings of the Board of
Directors were held. The details of the composition of the Board
and its committees and of the Meetings held and attendance of
the Directors at such meetings and disclosure on acceptance of
Audit Committee recommendations by Board of Directors during
the year under review are provided in the Corporate Governance,
which is forming a part of this Board''s Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

The directors'' responsibility statement as required under section
134(5) of the Companies Act, 2013, reporting the compliance

with the Accounting Standards is attached and forms a part of the
Board''s Report.

The Directors accept the responsibility for the integrity and
objectivity of the Profit & Loss Account for the year ended March
31, 2025 and the Balance Sheet and Cash Flow Statement as at that
date ("financial statements”) and confirm that:

a) in the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper
explanation relating to material departures;

b) the directors have selected such accounting policies
and applied them consistently and made judgments and
estimates that are reasonable and prudent so as to give a true
and fair view of the state of affairs of the company at the end
of the financial year and of the profit and loss of the company
for that period;

c) the directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance
with the provisions of the Companies Act, 2013 for
safeguarding the assets of the company and for preventing
and detecting fraud and other irregularities.

d) the directors have prepared the annual accounts on a
going concern basis;

e) the directors have laid down internal financial controls to
be followed by the company and that such internal financial
controls are adequate and were operating effectively; and

f) the directors have devised proper systems to ensure
compliance with the provisions of all applicable laws and that
such systems were adequate and operating effectively.

BOARD EVALUATION

The Board of Directors has carried out an annual evaluation of
its own performance, board committees, and individual directors
pursuant to the provisions of the Act and SEBI Listing Regulations.
The performance of the Board was evaluated by the Board after
seeking inputs from all the directors on the basis of criteria such
as the board composition and structure, effectiveness of board
processes, information and functioning, etc.

The above criteria are broadly based on the Guidance Note on Board
Evaluation issued by the Institute of Company Secretaries of India.
In a separate meeting of Independent Directors, performance of
Non-Independent Directors, the Board as a whole and Chairperson
of the Company was evaluated, taking into account the views of
Executive and Non-Executive Directors.

At the Board meeting that followed the meeting of the Independent
Directors, the performance of the Board, its committees, and
individual directors was also discussed. Performance evaluation of
Independent Directors was done by the entire Board.

The Company has received declaration from each Director on
fulfilling the fit and proper criteria in terms of the provisions of
Master Direction - Reserve Bank of India (Non-Banking Financial
Company - Scale Based Regulation) Directions, 2023 ("RBI NBFC
Master Directions”). The Board of Directors has confirmed that
all the existing Directors are fit and proper to continue to hold
the appointment as Directors on the Board, as reviewed and
recommended by the Nomination and Remuneration Committee
on fit and proper criteria under RBI NBFC Master Directions.

DISCLOSURE UNDER THE SEXUAL HARASSMENT
OF WOMEN AT WORKPLACE (PREVENTION,
PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a Policy for prevention of Sexual
Harassment, in line with the requirements of the "Sexual
Harassment of Women at Workplace (Prevention, Prohibition and
Redressal) Act, 2013.” Internal Complaints Committee (ICC) has
been set up to redress complaints, as and when received, regarding
sexual harassment and all employees are covered under this Policy.

The Policy has been hosted on the Company''s website: https://
www.northernarc.com

There were no referrals received by the Committee, during the FY
2024-25 and the details are as follows:

(a) No. of complaints received in the year - Nil

(b) No. of complaints disposed off during the year - Nil

(c) No. of cases pending for more than ninety days - Nil

EXTRACT OF ANNUAL RETURN

Pursuant to the provisions of Section 92(3) and 134(3) (a) of
the Companies Act, 2013 read with Rule 12(1) of the Companies
(Management and Administration) Rules, 2014, draft Annual
return is uploaded on Company''s website link https://www.
northernarc.com and a copy of the Annual Return will be uploaded
on the Company''s website link as and when the same is filed with
the Registrar of Companies, Chennai.

CORPORATE AGENT

The Company has received a certificate of registration from the
Insurance Regulatory and Development Authority of India (''IRDAI'')
to act as corporate agent (composite) with validity of three years
from 14th June 2024 to 13th June 2027.

APPROVAL FOR FACTORING BUSINESS

The Company was granted a Certificate of Registration by the
Reserve Bank of India (RBI) on 28th May 2025, permitting it to
commence and carry on the business of factoring.

APPROVAL FOR EXTENSION OF TIME FOR CONVENING
OF THE ANNUAL GENERAL MEETING

During the Year, the Company has made an application to the
Registrar of Companies (ROC), seeking approval for extension of
time for convening of AGM for a further period of three months, i.e.,
up to 31st December 2024 for the financial year ended 31st March
2024. In this regard, the ROC, vide its letter dated September 24,
2024, had granted an extension of three (3) months, allowing the
Company to conduct its AGM on or before December 31, 2024, for
the financial year ended March 31, 2024 and the AGM has been
convened on December 19, 2024 which is within the extension of
time approved by the ROC.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS
PASSED BY THE REGULATORS OR COURTS OR
TRIBUNALS IMPACTING THE GOING CONCERN
STATUS AND COMPANY''S OPERATION IN FUTURE

No significant or material orders were passed by the Regulators
or Courts or Tribunals which impact the going concern status
operations of your Company in future.

RELATED PARTY TRANSACTIONS

The Company has adopted a policy on related party transactions
for the purpose of identification, monitoring and approving
of such transactions. The Related party policy is available on
website of the Company and the weblink for the same is https://
www.northernarc.com//assets/uploads/policies/Policy on
materiality of Related Party Transactions and dealing with
Related Party Transactions.pdf. During the year, your Company

has not entered into any transactions with Related Parties which
are not in the ordinary course of its business or not on an arm''s
length basis and which require disclosure in this Report in terms
of the provisions of Section 188(1) of the Companies Act, 2013.
Form AOC-2 is enclosed with this report as Annexure D.

COMPANIES WHICH HAVE BECOME OR CEASED TO BE
SUBSIDIARIES, JOINT VENTURES, OR ASSOCIATES OF
THE COMPANY DURING THE YEAR.

Nil

COMPLIANCE WITH DOWNSTREAM INVESTMENT
REGULATIONS PURSUANT TO RULE 23(6) OF THE
FOREIGN EXCHANGE MANAGEMENT (NON-DEBT
INSTRUMENTS) RULES, 2019

Pursuant to Rule 23(6) of the Foreign Exchange Management
(Non-Debt Instruments) Rules, 2019, the Board hereby confirms
that the Company has complied with the provisions relating to
downstream investment made during the financial year.

The downstream investment has been made in accordance with the
applicable provisions of the Foreign Exchange Management Act,
1999, the Foreign Exchange Management (Non-Debt Instruments)
Rules, 2019, and the Consolidated FDI Policy issued by the
Department for Promotion of Industry and Internal Trade (DPIIT).
The necessary statutory filings with the Reserve Bank of India and
other regulatory authorities, as applicable, have been completed
within the prescribed timelines.

REQUIREMENTS UNDER SECTION 197(12) OF THE COMPANIES ACT, 2013 READ WITH RULE 5 OF THE
COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

Disclosure to be made under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014
are given below:

Ratio of remuneration of each director to the median employee''s remuneration for the financial year:

Sr. No.	Name of Directors (Executive Director)	Director''s Remuneration (in INR)	Employees'' Median Remuneration (in INR)	Ratio
1.	Ashish Mehrotra MD & CEO	8,85,38,360	5,12,355	1:173

Percentage increase in remuneration of each director, Chief Executive Officer, Chief Financial Officer, Company Secretary in the Financial
Year vis-a-vis last financial year:

	% increase in
Name of director/ Key Managerial Personnel	remuneration vis-a-
	vis last financial year
Ashish Mehrotra, MD & CEO	43%
Atul Tibrewal, Chief Financial Officer	10%
Prakash Chandra Panda, Company Secretary and Compliance officer (effective April 22, 2024)	-
Dr. Kshama Fernandes, Non-Executive Non-Independent Director	-
Monika Gurung, Company Secretary and Compliance officer (upto April 22, 2024)	8%

Percentage increase in the median remuneration of
employees in the financial year: 16%

? Number of permanent employees on the rolls of the company:
1104 (as of 31st March 2025)

? Average percentage increase in the salaries of employees
other than the KMP in FY 2024-25 is 11.9%* and its
comparison with the percentile increase in the managerial
remuneration is 14%.

? Affirmation that the remuneration is as per the remuneration
policy of the company: The Company affirms that
remuneration of directors and employees of the company is
in accordance with the Nomination and Remuneration policy
of the company.

* the average increase in salaries of employees based on performance appraisal
during the last year.

PARTICULARS OF EMPLOYEES UNDER RULE
5(2) OF THE COMPANIES (APPOINTMENT AND
REMUNERATION OF MANAGERIAL PERSONNEL)
RULES, 2014

The statement containing particulars of employees as required under
section 197(12) of the Act read with Rule 5(2) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014,
is in a separate Annexure E forming part of this report. A copy of the
Board''s Report is being sent to all the members excluding Annexure E.
The said Annexure is available for inspection by the members at the
Registered Office of the Company during business hours on working
days. Any member interested in obtaining a copy of the same may write
to the Company Secretary at the Registered Office of the Company.

DETAILS OF THE TRANSFER/S TO THE INVESTOR
EDUCATION AND PROTECTION FUND (IEPF) MADE
DURING THE YEAR:

As per the provisions outlined in Regulation 61A of the SEBI
(Listing Obligations and Disclosure Requirements) Regulations,
2015 ("Listing Regulations”), the Company is required to transfer
unclaimed dividend/interest, if any, to an escrow account
maintained by the Company. Details regarding such transfers are
available on the Company''s website, in compliance with the SEBI
Circular dated November 08, 2023. The Company has also published
the procedure for claiming unclaimed amounts on its website at
the weblink https://www.northernarc.com/assRts/uploads/pdf/
Statement-of-Unpaid-Dividend-on-Preference-Shares-1591269762.

. Upon completion of seven years from the date of transfer to the
escrow account, the unclaimed amounts, if any, will be transferred
to the Investor Education and Protection Fund ("IEPF”). During the
reporting year, no transfer to the Investor Education and Protection
Fund (IEPF) was required to be made. The Company Secretary of
the Company has been designated as the Nodal Officer for handling
investor queries related to unclaimed amounts.

CODE OF CONDUCT

The SEBI Listing Regulations requires listed companies to lay
down a code of conduct for its directors and senior management,
incorporating duties of directors prescribed in the Act. Accordingly,
the Company has a Board approved code of conduct for Board
members and senior management of the Company and the details
are mentioned in the Corporate Governance Report.

All the Board members and senior management personnel have
affirmed compliance with the code for the for the FY 2025-26.

VIGIL MECHANISM AND WHISTLE BLOWER POLICY

Adequate vigil mechanism for directors and employees to report their
genuine concerns about unethical behaviour, actual or suspected
fraud or violation of the Company''s code of conduct is in place and
the same have been disclosed on the website of the company, www.
northernarc.com. No references under the whistle blower policy were
received during the Financial Year 2024-25. The same has also been
affirmed by the Audit Committee of the Board on a quarterly basis.

SECRETARIAL STANDARDS COMPLIANCES

The company has complied with the applicable Secretarial
Standards issued by The Institute of Company Secretaries of India.

THE CHANGE IN THE NATURE OF BUSINESS, IF ANY

There was no change in the nature of business of the company
during the year under review.

CONSERVATION OF ENERGY, TECHNOLOGY AND
ABSORPTION

Being a Non-Banking Finance Company and not involved in any
industrial or manufacturing activities, the Company''s activities
involve low energy consumption and has no particulars to report
regarding conservation of energy, technology and absorption.

INTERNAL FINANCIALS CONTROLS

The Board of Directors confirms that your Company has laid
down set of standards, processes and structure which enables
to implement Internal Financial controls across the organization
with reference to Financial Statements and that such controls are
adequate and operating effectively. During the year under review,
no material or serious deviation has been observed for inefficiency
or inadequacy of such controls.

A statement indicating development and implementation of a
risk management policy for the company including identification
therein of elements of risk, if any, which in the opinion of the Board
may threaten the existence of the company.

The Board affirms that the company has developed and
implemented a comprehensive Risk Management Policy.
This policy outlines a structured and proactive approach to
identifying, assessing, mitigating, and monitoring various risks
that could potentially impact the company''s operations, financial
performance, and long-term sustainability.

Details of identification, assessment, mitigations, monitoring and
the management of these risks are mentioned in the Management''s
Discussion and Analysis Report appended to this Report.

OTHER DISCLOSURE:

In terms of applicable provisions of the act, the company discloses
that during the year under review:

(i) The company has not issued any shares with Differential
rights and hence no information as per Provisions of section
43(a)(ii) of the act read with rule 4(4) of the companies
(share capital and debenture) Rules, 2014 is furnished.

(ii) The company has not issued any sweat equity shares and
hence disclosure as per section 54(1)(d) of the act Read with
rule 8(13) of the companies (share capital and debenture)
rules, 2014 is not provided.

(iii) There were no instances of non-exercising of voting Rights
directly by Employees in respect of shares to which the
scheme relates, hence no information Pursuant to section
67(3) of the act read with rule 16(4) of companies (share
capital and debentures) Rules, 2014 is furnished.

(iv) There were no amounts required to be transferred to investor
education and protection fund (IEPF) pursuant to section
124 and 125 of the companies act,2013 read with rules
made thereunder.

(v) The Company is complying of the provisions relating to the
Maternity Benefit Act 1961

(vi) There are no significant and material orders passed by the
regulators or courts or tribunals that would impact the going
concern status of the company and its future operations.

(vii) Neither any application was made, nor any proceedings are
pending under the insolvency and bankruptcy code, 2016
against the Company.

(viii) There were no instances of one-time settlement for any loans
taken from the banks or financial institutions.

ACKNOWLEDGEMENT

The Directors wish to thank the Reserve Bank of India, SEBI, Stock
Exchanges and other statutory authorities for their continued
support and guidance. The Directors also place on record their
sincere thanks for the support and co-operation extended by the
bankers and shareholders of the Company.

The Directors also thank the employees of the Company for their
contribution toward the performance of the Company during the
year under review.

For and on behalf of the Board of Directors
Northern Arc Capital Limited

P S Jayakumar Ashish Mehrotra

Independent Director & Chairman Managing Director & CEO

DIN: 01173236 DIN: 07277318

Date: July 2, 2025
Place: Chennai

---

Mar 31, 2024

Your directors have pleasure in presenting this board''s report along with the audited financial statements of the Company for the year ended March 31, 2024.

Financial Highlights

	Standalone		Consolidated
Particulars	Year ended March 31, 2024	Year ended March 31, 2023	Year ended March 31, 2024	Year ended March 31, 2023
Total income	1,84,431.68	1,25,787.48	^>1,90,603.25	1,31,120.03
Finance costs	72,586.35	55,690.71	72,638.50	55,744.89
Net interest income	1,11,845.33	70,096.77	1,17,964.75	75,375.14
Operating expenses	60,522.55	34,871.32	61,905.72	37,939.50
Depreciation	1,467.03	1,026.14	1,694.42	1,204.43
Pre-provision profit	49,855.75	34,199.31	54,364.61	36,231.21
Impairment and write-offs	12,313.52	3,894.37	12,243.79	3,921.38
Share of loss from associates	-	-	97.21	187.27
Profit before tax	37,542.23	30,304.94	^^^42,023.61	32,122.56
Tax expense	9,525.12	7,769.33	10,254.34	7,901.02
Profit for the period	28,017.11	22,535.61	^^^31,769.27	24,221.54
Other comprehensive income/(loss)	1,932.22	(1,084.80)	2,025.35	(1,461.61)
Total comprehensive income	29,949.33	21,450.81	33,794.62	22,759.93
Total comprehensive income to Owners	29,949.33	21,450.81	32,850.40	21,732.23
Opening balance of retained earnings	67,717.57	49,164.53	69,899.17	51,340.90
Transfer to reserves	(5,603.42)	(4,507.12)	(5,603.43)	(4,507.12)
Appropriations and other adjustments	153.34	524.55	906.19	64.33
Closing balance of retained earnings	90,284.60	67,717.57	^^96,035.32	69,899.17

During the year ended March 31, 2024, on a consolidated basis, your company generated total income of INR 1,90,603.25 lakh, a growth of 45.37% over the earlier year. Net Interest Income was INR 1,17,964.75 lakh, representing year-on-year increase of 56.50%, which resulted in a profit after tax of INR 31,769.27 lakh, 31.16% higher than the previous year.

Dividend

Due to the requirement of deploying the funds back into the business for the growth of your Company, your directors have not recommended any dividend for the year under review.

Transfer To Reserves

During FY 2023-24, your Company has transferred an amount of INR 5,603.43 lakh to reserves in accordance with the requirements of Section 45-IC (1) of the Reserve Bank of India Act, 1934.

Credit Rating

The Credit ratings of the company as on March 31, 2024, are summarised below:

Instrument	Rating Agency	Rated Amount (INR Crore)	Rating and Rating Action
Commercial Papers	ICRA	300	ICRA A1 (Stable)
	CARE	500	CARE A1 (One Plus)
Secured NCD under Private Issue	ICRA	325	ICRA AA- (Stable)
	INDIA RATING	3,69.90	IND AA- (Stable)
Subordinated debts	ICRA	-	Withdrawn
Term loans from banks	ICRA	5,989.15	ICRA AA- (Stable)

Capital Adequacy

The company''s capital adequacy ratio as of March 31, 2024, was 18.26% as against 20.77% as at March 31, 2023. The minimum capital adequacy ratio prescribed by Reserve Bank of India is 15%.

Share Capital

During the financial year, your company had allotted 3,54,127 equity shares under the Employees Stock Option Schemes of the Company.

Consequent to the aforesaid allotments of equity shares, the total paid up capital of the Company as on March 31, 2024, was INR 1,72,03,18,280/- comprising of 8,93,85,420 equity shares of INR 10 each and 4,13,23,204 compulsorily convertible preference shares of INR 20 each.

On April 22, 2024, your company had allotted compulsorily convertible preference shares (“CCPS”) to the following investors:

S. No.	Name of the Investor	No. of CCPS
1.	International Finance Corporation	8,491,048
2.	RJ Corp Limited	639,386
3.	Varun Jaipuria	639,386

Your Company had allotted 5,26,16,624 fully paid-up Equity shares of INR 10/- each on August 09, 2024 upon conversion of all the existing CCPS issued by the Company. Further, your company had allotted 1,90,65,326 Equity shares on September 20, 2024 through the initial public offering of its Equity Shares.

During the period from April 01, 2024 till September 30, 2024 your company had allotted 3,11,966 equity shares under the Employee Stock Option Scheme of the Company.

Directors and Key Managerial Personnel

Directors and Key Managerial Personnel

The composition of the Board of Directors of the Company is in accordance with the provisions of section 149 and 165 of the Companies Act, 2013 read with Regulation 17 of the SEBI Listing Regulations with an appropriate combination of Executive Director, Non-Executive Directors and Independent Directors.

Pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. T S Anantharaman (DIN: 00480136) and Mr. Vijay Chakravarthi (DIN: 08020248), retires by rotation and being eligible, offers themself for re-appointment. The resolutions seeking shareholders'' approval for their appointment forms part of the Notice.

During the year under review Ms. Bama Balakrishnan, Executive Director and Chief Operating Officer (DIN: 06531188) resigned from the Board as Executive Director with effect from November 13, 2023 and continued as Chief Operating Officer of the Company till March 31, 2024. The Board places on record its appreciation of the valuable services rendered by Ms. Bama Balakrishnan during her tenure as Executive Director and Chief Operating Officer of the Company.

Ms. Srividhya was resigned from the Company as Company Secretary and Compliance Officer of the Company with effect from November 20, 2023.

Ms. Monika Gurung was appointed as Company Secretary and Compliance officer of the Company for an interim period and with effect from January 18, 2024.

Ms. Monika Gurung was ceased to be the Company Secretary and Compliance Officer and continuing as employee of the Company and Mr. Prakash Chandra Panda has been appointed as the Company Secretary and Compliance Officer of the Company with effect from April 22, 2024.

Dr. Kshama Fernandes, is a non-executive nonindependent director, who was initially appointed to the Board as Executive Director with effect from August 1, 2012, and was re-designated as Non-Executive Director, Non-Independent and Vice-Chairperson of the Company with effect from April 1, 2022. Pursuant to SEBI notification dated June 14 2023 read with regulation 17(1D) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (''SEBI Listing Regulation'') effective from July 15, 2023, the Board at its meeting held on August 06, 2024 had approved the continuation of Dr. Kshama Fernandes as a NonExecutive, Non-Independent Director and ViceChairperson of the Company for a further period of one year with effect from April 01, 2024. A resolution seeking your approval has been set forth in the notice convening of Annual General Meeting.

During the year, Mr. Ashish Mehrotra, Managing Director and Chief Executive Officer, Ms. Bama Balakrishnan, Executive Director (up to November 13, 2023) and Chief Operating Officer (up to March 31, 2024), Mr. Atul Tibrewal, Chief Financial Officer, Ms. R Srividhya, Company Secretary and Compliance Officer (upto November 20, 2023) and Ms. Monika Gurung, Company Secretary and Compliance Officer (effective January 18, 2024) of the Company have been designated as the Key Managerial Personnel of the Company (KMP) pursuant to the provisions of Sections 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Declaration of independence under Section 149(6) of the Companies Act, 2013

The Independent Directors of the Company have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and there has been no change in the circumstances which may affect their status as independent director during the year.

Pecuniary Transactions with non-executive directors

Details of remuneration to non-executive directors are provided in the Corporate Governance Report.

Management Discussion and Analysis

Market Overview

(i) Economic Outlook

India is currently the fifth-largest economy in the world, trailing only the US, China, Germany, and Japan, with a GDP of INR 172 trillion and a strong growth rate of 6.8%. By FY 2028-29, projections indicate that India''s GDP will surpass INR 230-240 trillion, with a consistent growth rate of 6.5%.

Over the past three years, the Indian economy registered an average growth rate of 8.3 %. India''s real GDP growth has been pegged at 8.2 % for FY 2023-24 as per the provisional estimates released by the National Statistical Office (NSO). The GDP growth has been supported by a boost in capital expenditure particularly in infrastructure development including roads, highways, railways and housing with the Government doing the heavy lifting. Additionally, private sector investment also showed some signs of resurgence in sectors such as cement, steel, oil and gas.

On the other hand, private consumption growth slowed to 4.0% in FY 2023-24 from 6.8 % in FY 2022-23. To recall, post the pandemic, consumption had been driven by services along with high demand for premium products. However, as this pent-up demand effect waned, and interest rates started rising consumer demand slowed down in FY 2023-24. Moreover, high food inflation and an uneven monsoon weighed on rural demand recovery.

(ii) Key Drivers of Growth

1. Steady Inflow of Global Capital: India continues to attract significant foreign investments, with Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs) showing a 44% increase in FY 2023-24 compared to FY 2022-23. This trend reflects growing investor confidence in India''s economic potential.

2. Thriving Financial Markets Supported by a Stable Government: The Nifty50 index has demonstrated impressive performance, delivering returns of approximately 23% compounded annually from FY 2019-20 to FY 2023-24. This underscores the resilience and stability of India''s financial markets.

3. Innovative India Tech Stack Initiatives: Programs such as the Goods and Services Tax (GST), Open Network for Digital Commerce (ONDC), Unified Payments Interface (UPI), and Open Credit Enablement Network (OCEN) are revolutionising the economic landscape. These initiatives are improving connectivity between small businesses and consumers, streamlining financial transactions, and driving economic growth.

4. China Plus One Policy: India''s competitive labor costs, vast workforce, and supportive policy reforms are attracting companies looking to diversify their operations beyond China. This strategic shift is fueling India''s economic expansion.

5. Expanding Middle-Class Population: The

number of middle-income households— those earning between INR 2 to INR 10 lakh annually—has been rising steadily and is projected to continue growing with increasing GDP and household incomes. According to CRISIL MI&A, there were 41 million households in this category at the end of FY 2011-12. By FY 2029-30, this figure is expected to reach 181 million, representing a compound annual growth rate (CAGR) of 9%. This surge in middle-income households will create substantial opportunities for retail, MSME financiers, and consumer goods marketers.

6. Rapid Credit Penetration: Credit penetration in India is expanding at a remarkable pace. Systematic credit growth has achieved a CAGR of approximately 11%, reaching INR 207 trillion in FY 2023-24. Projections suggest that systematic credit will grow at a CAGR of 13%-14%, reaching INR 264.6 trillion by FY 2025-26.

Emerging risks on the global front could pose challenges to India''s growth trajectory and inflation outlook. Higher crude oil prices because of any escalation in Middle East tensions and tighter global oil supply pose a risk for domestic growth and inflation. Moreover, the impact of geopolitical tensions on global supply chains could hurt India''s exports to major trading partners and escalate costs. However, while global challenges may pose some risks, the resilience and momentum shown by the domestic economy in recent years suggests it is well equipped to navigate any potential headwinds.

(iii) Retail Credit Growth

The retail credit (includes Housing finance, Vehicle Financing, Gold Loans, Education Loans, Consumer Durables, Personal loans, Credit cards and Microfinance) in India stood at INR 75.2 trillion, as of FY 2023-24 and has rapidly grown at a CAGR of 16.0% during FY 2019-20 and FY 2023-24 and is expected to further grow at CAGR of 15.83% between FY 2023-24 and FY 2025-26 to reach INR 100.9 trillion by FY 2025-26. The moderation of growth of retail credit is on account of normalisation in unsecured segment which had witnessed exuberant growth in the past and impact of RBI''s risk weight circular. Moreover, the increasing demand and positive sentiments in the Indian retail credit market, presents an opportunity for both banks and NBFCs to broaden their investor base.

Retail Credit Growth (INR Tn) 100.9
63.1 51.6 45.5 FY21 FY22 FY23	86.8 ‘ FY24E FY25P FY26P

(iv) NBFC Industry Outlook

Over the years, the Non-Banking Financial Company (NBFC) sector has significantly evolved in terms of size, operations, technological sophistication, and diversification into new areas of financial services and products. The sector has witnessed substantial growth in both the number of NBFCs and their overall size, with numerous players adopting diverse business models. According to CRISIL, the share of NBFC credit in the overall systemic credit is projected to reach 21% by FY 2025-26, up from approximately 19% in FY 2023-24. The increasing penetration of neo-banking, digital authentication, mobile phone usage, and mobile internet has led to the modularisation of financial services, particularly in the credit segment.

From FY 2019-20 to FY 2023-24, NBFC credit experienced a CAGR of approximately 12%, primarily driven by the retail segment. The retail segment, which accounts for about 48% of overall NBFC credit, witnessed a CAGR of around 15%, whereas NBFC non-retail credit grew by approximately 9% during the same

period. Looking ahead, the NBFC retail segment is expected to grow at a CAGR of 16-18% between FY 2023-24 and FY 2025-26, supporting the overall NBFC credit growth. The retail segment''s market share is projected to stabilise at around 48.5% in FY 2025-26.

With the growth observed in the NBFC industry, Asset quality also witnessed an improvement and witnessed a fall in Industry GNPA and NNPA.

GNPA/NNPA (%)
6.10%			5.80%
				¦		5.00%
									4.10%
		2.80%			2.30%			1.70% ¦
		1			i						1.50%
	FY21			FY22			FY23			FY24

(v) Business Overview

I n FY 2023-24, Northern Arc maintained its strategic focus on profitable growth in business within the guardrails of risk and compliance. The Company grew its credit portfolio with a focus on granularity and saw growth across segments, facilitating credit worth INR 29,324 Crore. With this we have been also able to achieve increase in our yields through our constant efforts to expand Direct-to-Customer (D2C) segment thereby resulting in expansion of spreads from 5.89% in FY 2022-23 to 7.53% in FY 2023-24 and achieving an ROE of 14.54% and an ROA of 2.97%. Even though we have expanded our business further in the D2C segment, through our robust risk management business, we have been able to lower our GNPA and NNPA in FY 202324 to 0.45% and 0.08% which are well below the industry standard.

Key Updates:

1. Northern Arc raised INR 382 Crore from International Finance Corporation, a member of the World Bank Group and others. The funding round was officially closed on April 22, 2024.

2. Northern Arc Capital Limited got listed on NSE and BSE on September 24, 2024.

3. Our credit rating was also upgraded to AA- (Stable) credit rating by India Ratings in September 2023 in addition to ICRA update earlier.

4. We were certified as Great Place to Work for the 4^th consecutive year.

(vi) Assets Under Management (AUM):

According to the CRISIL Report, we are among India''s leading diversified NBFCs in terms of Assets Under Management (AUM) as of March 31, 2024.

Our AUM surpassed the INR 10,000 Crore milestone in September 2023, reaching INR 11,710 Crore in March 2024 across 671 districts, 28 states, and seven union territories in India. This represents a 3-year CAGR of 31%, primarily driven by the growth in our Direct-to-Customer (D2C) business. The D2C share of AUM increased from 38% in March 2023 to 50% in March 2024.

Intermediate Retail AUM: The intermediate retail AUM witnessed a y-o-y growth of 5%. In the FY 2023-24, we onboarded 30 new originator partners and worked with 116 repeat originators.

Direct-to-Customer (D2C) AUM: The D2C

segment has witnessed accelerated growth, driven by our expansion in MSME product suite to include MSME secured LAP, Supply chain finance (SCF), Rural Finance and growth in our Partnership Based Lending. The D2C AUM grew 72.30% YoY from FY 2022-23 to FY 2023-24. As of March,21 2024, we have 16 lakh D2C Borrowers.

Gross Transaction Value:

The company''s gross transaction value witnessed a y-o-y growth of 7% in FY 2023-24 with a growth of 26% observed in disbursements from INR 11,788 Crore in FY 2022-23 to INR 14,885 Crore in FY 2023-24.

(vii) Performance Overview:

Total Income:

Our consolidated total income increased from INR 1,311 Crore in FY 2022-23 to INR 1,906 Crore in FY 2023-24 (YoY growth of 45%). This growth was mainly due to rise in interest income from INR 1,102 Crore in FY 2022-23 to INR 1,588 Crore in FY 2023-24 a YoY growth of 44% primarily driven by:

• Higher yields in FY 2023-24 coming from increased proportion of D2C in the company''s overall AUM in FY 2023-24. Interest yields stood at 16.4%, enhancing overall spreads to 7.5% in FY 2023-24 from 5.9% in FY 2022-23.

• Increase in earning assets: y-o-y growth in earning assets was 27.3%, increasing from INR 8,539.2 Crore in FY 2022-23 to INR 10,869 Crore in FY 2023-24.

Profitability:

The consolidated profit after tax to the company was INR 317.6 Crore resulting in a YoY increase of 31.16%, driven by improvement Net interest margins from 6.48% in FY 2022-23 to 8.33% resultantly achieving a ROA of 2.97% (24 bps higher than FY 2022-23) and ROE of 14.54% (199 bps higher than FY 2022-23).

Asset Quality and Risk Management:

Our risk management approach has enabled us to actively identify, monitor and manage risks towards creating strong and sustainable business operations. As a result of our approach to risk management, according to the CRISIL Report, we had one of the lowest GNPA of 0.45% and NNPA of 0.08%, as of FY 2023-24 with a healthy capital adequacy ratio of 18.26% and Debt to Equity ratio of 3.9x. Our credit cost for FY 202324 was 1.2%.

Credit Rating:

Our credit rating was upgraded from A to AA-during the year by ICRA. We believe that this will help us access a more diversified set of investors and open the doors to newer segments who have a minimum AA category threshold. It should help us bring down our cost of funding, which will boost our spreads and profitability. It will also aid growth as we will be able to lend to clients who were earlier not sufficiently profitable.

(viii)Strategic Overview

Our Strategic Emphasis: Strengthen, Grow, and Reimagine

Strengthen Our Core and Mature Businesses

We are scaling our established businesses— Lending both Intermediate Retail and Direct to Consumer, Placements, and Fund Management— by bolstering our senior leadership and building a robust liability franchise with focus on robust Risk Management Culture.

Grow Our New Business Lines

We have significantly expanded in the D2C segment, diversifying our portfolio and increasing the mix to 50%. This has been achieved by developing a comprehensive MSME suite, serving over 400,000 rural finance borrowers through our subsidiary Pragati, expanding to more than 300 locations, and enhancing our supply chain proposition with multiple products.

Reimagine Our Business Through Technology and Data

We have reimagined our tech offerings (AltiFi, nuScore, nPos, and Nimbus), making them revenue accretive.

Updates on Our Tech Offerings:

AltiFi

AltiFi is a retail investment platform that democratises access to debt securities on the Northern Arc balance sheet, offering investment opportunities to retail individuals and corporates. As of March 31, 2024, AltiFi had 31,272 registered users, facilitated by distributors, enabling investments totaling INR 152 Crore in FY 2023-24.

nuScore

nuScore is a machine learning-based analytical module tailored to assist our originator partners in the loan underwriting process, enhancing credit decision effectiveness. In FY 2023-24, we began generating revenue through nuScore with our first client, Pahal, conducting 17,052 assessments.

nPos

nPos is a fully integrated API-based technology solution that connects the systems of both Originator and Investor Partners, streamlining co-lending processes. As of March 31, 2024, we have 21 active nPos partners and have executed transactions worth INR 5,989 Crore in FY 2023-24.

Nimbus

Nimbus is a curated debt platform that facilitates credit flow to our Originator Partners through our balance sheet or Investor Partners, creating a network effect. By M arch 3 1 , 2024, N i m bus had 147 active originators and 72 active investor partners, enabling transactions worth INR 17,620 Crore in FY 2023-24.

Subsidiaries and Associates:

Your Company has 5 subsidiary companies,

i.e., Northern Arc Investment Managers Private Limited; Pragati Finserv Private Limited, Northern Arc Foundation (a company incorporated under section 8 of the Act), Northern Arc Investment Adviser Services Private Limited and Northern Arc Securities Private Limited and one (1) associate company, i.e., Finreach Solutions Private Limited.

I nformation on the performance and financial position of the subsidiaries and associate company are provided in form AOC 1 enclosed as Annexure- A.

The details of subsidiaries and associate are

as follows:

i. Northern Arc Investment Managers Private Limited (NAIM)

FY 2023-24 marks the completion of a decade of Northern Arc Investment Managers (NAIM). From our humble beginnings with the launch of a small INR 100 Crore microfinance fund to raising our largest fund ever of INR 1,000 Crore, NAIM has come a long way. Our underwriting skills have expanded from a complete microfinance focus to an ability to underwrite across our six focus sectors. We have explored a myriad of structures—including an Open-Ended CAT III Debt Fund, Unified Fund, MLD Fund, Separately Managed Account, Non-FI Fund, and leveraged fund—to provide diverse investment avenues for our extensive pool of investors, which comprises of retail investors, institutions, corporates, and Development Finance Institutions (DFIs). Notably, five of our ten funds have completed their fund cycles, each delivering higher-than-expected returns.

NAIM closed FY 2023-24 with cumulative investor commitments of INR 3,745 Crore with total investments of INR 6,600 Crore across sectors and expanded its investor base to 800 investors. We added 330 new investors across corporates, family offices, high net worth individuals, global and domestic funds, and development finance institutions, highlighting the growing recognition and trust in our platform. We also have received Sebi approval for the launch of two new AIFs.

Fund raising maintained its momentum as we raised over INR 600 Crore in Northern Arc Emerging Corporates Bond Fund (ECB), thereby completing the final close of the fund in November 2023 as targeted. However, due to the extended start-up funding winter, the ECB commitments could not be completely drawn down. Northern Arc Money Market Alpha Fund (MMA) also saw an inflow of INR 600 Crore which helped it reach its highest ever AUM of INR 1,500 Crore in November, 2023. Unfortunately, the latest RBI circular related to the regulated entities (RE) exposure, the MMA fund saw a significant redemption in December 2023, leading to reduction in AUM.

We also added another esteemed offshore investor to our list from which we secured

INR 245 Crore of signed commitments, effectively doubling our offshore commitments. Additionally, offshore commitments worth INR 520 Crore are in pipeline from Development Finance Institutions for Northern Arc Climate fund, our first ever leveraged fund to be launched in GIFT City in FY 2024-25.

Within the Portfolio Management Services platform, our first ever Discretionary PMS Strategy, Northern Arc Income Builder Series A, matured in February, 2024, delivering a return of ~8.75% to all its investors. This achievement once again demonstrates our expertise across a new platform category and strengthens our position among our peers as one of the strongest contenders in the private credit market. Along with this, we launched our third Discretionary PMS Strategy, Northern Arc Credit Opportunities Strategy, which focusses on investing in securities rated A- and above and would finance companies that provide credit to financially underserved end-customers.

FY 2023-24 continued to be the year of accolades, as our accomplishments were recognised and celebrated across various platforms domestically as well as internationally. NAIM was featured in the Impact Assets 50 list for the fourth consecutive year, an annual showcase highlighting fifty fund managers worldwide who excel in creating positive social impact while generating financial returns for investors. Additionally, NAIM won the prestigious ''Best Investment Management Company'' award at the CX Summit, marking another significant milestone in our journey.

The past decade has been an incredible journey for NAIM, filled with growth, learning, and milestones. With the unwavering support of our investors and the recognition we''ve received through numerous accolades, it has been a period of remarkable progress and transformation. Inspired by this success, we are excited to continue building on this momentum and achieving even greater heights in the coming decade.

ii. Pragati Finserv Private Limited

Pragati Finserv the rural Finance subsidiary of Northern Arc Capital was incorporated in FY 2020-21 to offer small ticket loans to under-served rural and semi-urban areas of the country through an efficient, agile and scalable combination of digital platform and

physical branches. Pragati serves the diverse needs of customers belonging to low-income households of rural and semi-urban areas. It aims to become a one stop lending shop for its borrowers covering income-generating micro loans and household loans.

The current product offering of Pragati is Krushi JLG loan for rural women customers with a ticket size of INR 30,000 to 75,000. JLG Graduate Loan (Shakti) with Ticket Sizes ranging from INR 75,000 to 1,25,000 in pilot testing phase, which will meet the various end uses of customers like 2-3 wheeler, commercial vehicles, Home Improvement and WASH, Agri, Education and Dairy is expected to be launched shortly.

As of March 31, 2024 the Portfolio Outstanding of Pragati is 1,29,147.75 lakh with 4.03 lakh Active Clients and 4.40 lakh Active Loans. The current collection efficiency for the FY 2023-24 is 99.2%. The DPD 30 portfolio of Pragati is INR 1,444 lakh which is 1.11% of the total portfolio outstanding.

Pragati has 262 operational branches across 8 states and 1 UT. During the FY 2023-24, 76 New branches have been opened with green field expansion in UP and Bihar with 19 branches each, 7 branches in Jharkhand and 31 branches in Karnataka.

Technology is the backbone of Pragati and is the key differentiator for our organisation to grow. The technology would enable Pragati to provide best in class Customer services, right-sized loans and quick turnaround time and these three would be the key focus for its product delivery. During the FY 202324 we have launched Aryabhatta 2.0 our internally developed front-end application with the primary purpose of improving the efficiency of our field employees. The application is live with collections, field monitoring, attendance and collection modules. Our Quality Control application “Dhruva” has inbuilt sourcing risk controls including KYC authentications, Bank account validations, Credit Bureau checks and Income assessments among others to select the best of customers. All the decisions at Pragati are data led and our Data Analytics plays a crucial role in Portfolio Monitoring, Risk assessment and Early Warning Signals. Completed integration with nPOS for quicker decision making, application quality check and faster disbursements.

There are a total of 1,817 active employees in Pragati with 1,296 Loan Officers and 274 Branch Managers, who constitute majority of the workforce. The Average portfolio Outstanding per Loan Officer Increased from INR 90 lakh in FY 2022-23 to INR 100 lakh in FY 2023-24. The number of clients handled by each Loan Officer has also increased from 263 in FY 2022-23 to 312 in FY 202324. Branches which have completed 12 months vintage have an average Portfolio Outstanding of INR 700 lakh in line with the NBFC-MFI standards.

Pragati being the Multi-Lingual and MultiCultural company, people are at the centre of all the decision-making policies. Capability Building is the core of business, and we deliver trainings through a hybrid model via the 40 Training centres across the country. “SANKALP” is the flagship strategy and ideations workshop for Mid and Senior Managers conducted in April, 2023. “SAMPARK” is the CEO-Interface with the field team conducted across all the regions in the country in May and June, 2023. The Annual rewards and recognition program “SAMPARK''24” was conducted in January, 2024 at Hyderabad. Pragati has won the “Best Upcoming Microfinance” and “Best Data Driven Microfinance of the year awards at the prestigious LendTech X Awards.

iii. Northern Arc Foundation:

Northern Arc, beyond the regulatory compliance, believes in giving back to the community and has embraced Corporate Social Responsibility (CSR) to make a meaningful and significant contribution to promote sustainable community development. The company has a strong commitment towards long term value creation through its social investing; in recognition of which has established Northern Arc Foundation (“Foundation”) to implement CSR interventions for the group companies. The Foundation has been dedicated to making social investment for sustainable outcomes across the nation where Northern Arc has its presence. The areas where the Foundation makes significant contribution in FY 2023-24 are Education, Skill Development, and Healthcare. The company supported the following initiatives through its CSR contribution in FY 2023-24:

(i) Supported government run nursery school by providing educational and

teaching material, school supplies to the students and supporting in extracurricular activities and teacher development programmes.

(ii) Provided monetary support for underprivileged students in the rural areas for their tuition, special coaching, and student in Mumbai Area.

(iii) Provided holistic nutritional support for children who are fighting cancer at St. John''s Hospital Bangalore.

(iv) Supported students in rural areas of Tamil Nadu in the form of skill development, digital literacy, and training programs for students taking professional examination.

iv. Northern Arc Investment Adviser Services Private Limited (NAIA)

NAIA was established to provide high quality advice and products in asset classes that impact the financially excluded. NAIA is registered with the SEBI as an investment adviser in terms of the SEBI Investment Advisers Regulations.

v. Northern Arc Securities Private Limited (NAS)

NAS is a wholly owned subsidiary of the Company and registered as a stockbroker with SEBI. The Company has also obtained the Online Bond Platform Provider (OBPP) enablement in the debt segment from NSE to help democratise the debt offerings from corporate and government institutions which is offered through the platform of “Altifi”.

Vi. Finreach Solutions Private Limited (Finreach)

Finreach is engaged in providing business consultancy and facilitation services to various entities including Companies, Body Corporates, Trusts, Special Purpose Vehicles, Banks, and Financial Institutions (whether incorporated in India or not) which are engaged in offering credit enhancement, credit default protection and guarantee (fund and non-fund based) solutions to lenders of Micro, Small & Medium Enterprises and similar unserved or underserved entities, and devising technological and non-technological solutions, systems and framework for undertaking such operations including identifying potential lenders, building the risk management framework including technology platforms required to

provide the facilitation services, enabling administration of credit enhancement, credit default protection and guarantees (fund and non-fund based), monitoring the performance of the loan portfolio, and performing such other actions or services which are included in the value chain of the product/services offered by the various entities.

Fixed Deposits

The Company being non-deposit taking Non-Banking Financial Company - Investment and Credit Company (NBFC-ICC), has not accepted any deposits during the year under review. Further, the Company had also passed a board resolution to the effect that the company has neither accepted public deposit nor would accept any public deposit during the year under review, as per the requirements of Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016.

Foreign Exchange Earnings and Outgo

There were no foreign exchange earnings during the year or the previous year. Total foreign exchange outgo during the year under review was INR 4,601.97 lakh (previous year: INR 930.84 lakh) under the head listed below:

Head of Expense	March 31, 2024	March 31, 2023
Subscription charges	5.39	-
Legal and professional charges	379.33	357.06
Directors’ sitting fees	19.79	-
Finance cost	4,197.46	573.78
Total	4,601.97	930.84

Meeting of the Independent Directors

In terms of Para VII of Schedule IV of the Companies Act, 2013, your Company conducted a meeting of its independent directors during the financial year under review, without the presence of non-independent directors and members of the management. The Independent Directors inter alia,:

(a) reviewed the performance of non-independent directors and the Board as a whole.

(b) reviewed the performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors.

(c) assessed the quality, quantity, and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

Auditors:

Statutory Auditors

The shareholders at the annual general meeting held on September 30, 2022 approved the reappointment of S.R. Batliboi & Associates LLP, Chartered Accountants, having ICAI Firm Registration No: 101049W/E300004 as statutory auditors of the Company based on recommendation of audit committee, board of directors and after obtaining a confirmation on eligibility under Section 141 of the Act from S.R. Batliboi & Associates LLP and RBI''s Guidelines dated April 27, 2021 for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs), for a period of 2 years till the conclusion of the 16^th Annual General Meeting to be held for the financial year ended on March 31, 2024. Your statutory auditors will be completing their current term of 2 years at the conclusion of the ensuing AGM.

In terms of Section 139 of the Companies Act, 2013 and the rules made thereunder, the Board had on the recommendations of the Audit Committee, recommended the appointment of M/s. Walker Chandiok & Co LLP, Chartered Accountants, having ICAI Firm Registration No. ICAI Firm Registration No.: 001076N/N500013 as statutory auditors of the Company for a period 3 (three) consecutive terms, to hold office from the conclusion of 16^th Annual General Meeting till the conclusion of 19^th Annual General Meeting, subject to shareholders approval at the ensuring AGM. The resolutions seeking shareholders'' approval for their appointment forms part of the Notice.

There has been no qualification, reservation or adverse remark given by the Statutory Auditors in their Report for the year under review.

Secretarial Auditors

Pursuant to provisions of Section 204 of the Act and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed M Damodaran & Associates, Company Secretaries, to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith as “Annexure B". The Secretarial Audit Report for the financial year ended March 31, 2024 does not contain any qualification, reservation or adverse remark in their report. However, there are certain observations which states that there is a delay in filing under SEBI LODR Regulations and SEBI Circular No. SEBI/HO/DDHS/PoD1/P/CIR/2023/119 dated August 10, 2021. The Secretarial observations are noted by the management and had taken necessary steps to ensure timely compliance under

applicable SEBI LODR Regulations and SEBI Circular No. SEBI/HO/DDHS/PoD1/P/CIR/2023/119 dated August 10, 2021.

Cost Records and Cost Auditors

The provisions of Cost Audit and Records as prescribed under Section 148 of the Act, are not applicable to the Company.

Reporting of Frauds by the Auditors to the Company

During the year, the Auditors have not reported any instance of fraud to the Audit Committee and Board as per Section 143 (12) of the Companies Act, 2013.

Compliance

Your Company is registered with Reserve Bank of India under Section 45IA of the Reserve Bank of India Act, 1934. Further, your Company has complied with and continues to comply with all the laws, rules, circulars and regulations applicable to the Company.

Changes to the Constitutional Documents During the year Under Review

a. Memorandum of Association:

In order to apply for the registration as Corporate Agents under the Insurance and Development Authority of India, new clause no. 6 has been inserted under to the main object clause of the Memorandum of Association vide special resolution passed by the members at their ExtraOrdinary General Meeting held on June 30, 2023.

Considering the business plan and future requirements of the Company, the authorised capital of the Company has been reclassified by amending the capital clause of the Memorandum of Association of the Company vide ordinary resolution passed by the members at their Extra-ordinary General Meeting held on January 18, 2024.

b. Articles of Association:

A new set of Articles of Association has been adopted by the Company by amending Part II of the Articles of Association vide special resolution passed by the members at their Extra-ordinary general meeting held on June 30, 2023.

A new set of Articles of Association has been adopted by the Company by amending the existing clause 4.1.4 and insertion of Clause

108B of Part II of the Articles of Association vide special resolution passed by the members at their Extra-ordinary general meeting held on September 13, 2023.

To enable the listing of its equity shares, the articles of association of the Company has been amended by the Company to confirm the requirements and directions provided by the Securities and Exchange Board of India (SEBI) vide special resolution passed by the members at their Extra-ordinary general meeting held on January 18, 2024.

Particulars of Loans, Guarantees Or Investments in Securities

In terms of Rule 11(2) of the Companies (Meetings of Board and its Powers) Rules, 2014, NBFC Companies are excluded from the applicability of Section 186 of the Act, 2013, where the loans, guarantees and securities are provided in the ordinary course of its business.

Details of investments under Section 186 of the Act, 2013 for the FY 2023-24 are provided in the financial statements.

Policy on Appointment of Directors and Remuneration Policy of the Company

The policy on directors'' appointment is based on the evaluation of fit and proper criteria for directors by the Nomination and Remuneration Committee prior to appointment of directors.

The Company''s policy on directors'' appointment and remuneration along with Terms of Reference and other matters provided in Section 178(3) of the Act is available on website of the Company and the weblink for the same is https://www.northernarc. com/governance.

Board and committee Meetings

During the FY 2023-24, Twelve meetings of the Board of Directors were held. The details of the composition of the Board and its committees and of the Meetings held and attendance of the Directors at such meetings are provided in the Corporate Governance Report.

Directors’ Responsibility Statement

The directors'' responsibility statement as required under section 134(5) of the Companies Act, 2013 are as follows:

The Directors accept the responsibility for the integrity and objectivity of the Profit & Loss Account for the year ended March 31, 2024 and the Balance

Sheet and Cash Flow Statement as at that date (“financial statements”) and confirm that:

(a) i n the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) t he directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

(d) the directors have prepared the annual accounts on a going concern basis;

(e) the directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

(f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Board Evaluation

The evaluation of all the Directors, the Board as a whole and each of the Committees of the Board was conducted based on the following criteria as recommended by the Nomination & Remuneration Committee adopted by the Board.

Evaluation criteria for independent directors and nonexecutive directors:

1. Understanding of the business of the company and contribution towards its strategic direction.

2. Attendance and participation in Board Meetings, whether in person, telephone or via video conferencing

3. Providing timely and effective inputs on minutes and other materials circulated to the Board

4. Inter-personal relations with the rest of the Board and management

5. Adherence to ethical standards and disclosure of non-independence, where it exists

Disclosure Under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has in place a Policy for prevention of Sexual Harassment, in line with the requirements of the “Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.” Internal Complaints Committee (ICC) has been set up to redress complaints, as and when received, regarding sexual harassment and all employees are covered under this Policy.

The Policy has been hosted on the Company''s website: https://www.northernarc.com

There were no referrals received by the Committee, during the FY 2023-24.

Extract of Annual Return

Pursuant to the provisions of Section 134(3) (a) and Section 92(3) of the Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, draft Annual return is uploaded on Company''s website link https://www.northernarc. com and a copy of the Annual Return will be uploaded on the Company''s website link.

Employee Stock Option Scheme

Your Company had introduced the Employee Stock Option Plan-2016, providing grants to employees of your Company and its subsidiaries. The details of the Employee Stock option schemes as required under Regulation 14 read with Part F of SEBI (Share based Employee Benefits and Sweat Equity) Regulations, 2021 is available on website of the Company and the weblink for the same is https://www.northernarc.com.

Corporate Agent

The Company has received a certificate of registration from the Insurance Regulatory and Development Authority of India (''IRDAI'') to act as corporate agent (composite) with validity of three years from June 14, 2024 to June 13, 2027.

Approval for extension of time for convening of the Annual General Meeting

The Company was made an application to the Registrar of Companies (ROC), seeking approval for extension of time for convening of AGM for a further period of three months, i.e., up to December 31, 2024 for the financial year ended March 31, 2024. In this regard, the ROC, vide its letter dated September 24, 2024, had granted an extension of three (3) months, allowing the Company

to conduct its AGM on or before December 31, 2024, for the financial year ended March 31, 2024. Hence, the AGM is being convened as per the extension of time approved by the ROC.

Listing

During the financial year under review, your Company had filed its Draft Red Herring Prospectus dated February 02, 2024 and the equity shares of the Company have been listed on BSE Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”) w.e.f., September 24, 2024.

Information on material changes and commitments

There are no material changes or commitments affecting the financial position of the Company which have occurred between the end of the financial year and date of this report. We also hereby confirm that there has been no change in the nature of business of the Company.

Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operation in future

No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and operations of your Company in future.

Application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016

Neither any application was made, nor any proceeding is pending under the Insolvency and Bankruptcy Code, 2016 against the Company.

Related Party Transactions

The Company has adopted a policy on related party transactions for the purpose of identification, monitoring and approving of such transactions. The Related party policy is available on website of the Company and the weblink for the same is https:// www.northernarc.com/ governance. During the year, your Company has not entered into any transactions with Related Parties which are not in the ordinary course of its business or not on an arm''s length basis and which require disclosure in this Report in terms of the provisions of Section 188(1) of the Companies Act, 2013. Hence, no particulars are being provided

in Form AOC-2 as set out in Annexure C of this Annual Report.

Companies which have become or Ceased to be Subsidiaries, Joint Ventures, Or Associates of the Company during the year.

Nil

Risk Management Policy

In the opinion of the Board, the Company has, since inception developed and implemented Risk Management policies and procedures that are sufficient to combat risks that may threaten the existence of the Company.

Internal Control Systems

The Company maintains appropriate systems of internal controls, including monitoring procedures, to ensure that all assets and investments are safeguarded against loss from unauthorised use or disposition. Company policies, guidelines and procedures provide for adequate checks and balances and are meant to ensure that all transactions are authorised, recorded and reported correctly.

The Internal Auditor reviews the efficiency and effectiveness of these systems and procedures which included evaluating the reliability of financial and operational information and ensuring compliance with applicable laws and regulations. The Internal Auditors submit their Report periodically which is placed before and reviewed by the Audit Committee.

Corporate Governance:

The Corporate Governance report which forms a part of Board''s Report which states that a detailed Company''s corporate governance practices, together with the certificate from the secretarial auditors confirming compliance, as per the SEBI Listing Regulations.

A certificate from the Secretarial auditors of the Company regarding compliance of conditions of corporate governance is annexed to this report.

Corporate Social Responsibility (CSR)

The brief outline of the Corporate Social Responsibility (CSR) policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure D of this report in the format prescribed in the Companies (Corporate Social Responsibility) Rules, 2014.

Requirements under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

Disclosure to be made under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

Ratio of remuneration of each director to the median employee''s remuneration for the financial year:

Sr Name of the Directors No.	Director''s Remuneration (in INR)	Employees'' Median Remuneration (in INR)	Ratio
1. Ashish Mehrotra, MD & CEO	5,55,89,340	6,23,004	1:89
2. Bama Balakrishnan1, Executive Director	4,98,66,170	6,23,004	1:80
3. Dr. Kshama Fernandes, Non-Executive Non-Independent Director	65,00,004	6,23,004	1:10
4. P S Jayakumar, Independent Director and Chairperson	90,00,000	6,23,004	1:14

* Bama Balakrishnan was resigned from the Board as Executive Director with effect from November 13, 2023 and continued as Chief operating officer of the Company and resigned on March 31, 2024.

Percentage increase in remuneration of each director, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Company Secretary in the financial year vis-a-vis last financial year:

1 Name of director/Key Managerial Personnel	% increase in remuneration vis-a-vis last financial year
Ashish Mehrotra, MD & CEO	40%
Bama Balakrishnan, Executive Director	9%
Atul Tibrewal, Chief Financial Officer	9%
R. Srividhya, Company Secretary	9%
Dr. Kshama Fernandes, Non-Executive Non-Independent Director	0
Monika Gurung, Company Secretary	0

Particulars of Employees under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

The statement containing particulars of employees as required under section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is in a separate Annexure E forming part of this report. A copy of the Board''s Report is being sent to all the members excluding Annexure E. The said Annexure is available for inspection by the members at the Registered Office of the Company during business hours on working days. Any member interested in obtaining a copy of the same may write to the Company Secretary at the Registered Office of the Company.

Vigil Mechanism and Whistle Blower Policy

Adequate vigil mechanism for directors and employees to report their genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Company''s code of conduct is in place and the same have been disclosed on the website of the company, https://www.northernarc.com/. No references under the whistle blower policy were received during the FY 2023-24. The same has also been affirmed by the Audit Committee of the Board on a quarterly basis.

Secretarial Standards Compliances

The company has complied with the applicable Secretarial Standards issued by The Institute of Company Secretaries of India.

Conservation of energy, Technology and absorption

Being a Non-Banking Finance Company and not involved in any industrial or manufacturing activities, the Company''s activities involve low energy consumption and has no particulars to report regarding conservation of energy, technology and absorption.

Acknowledgement

The Directors wish to thank the Reserve Bank of India and other statutory authorities for their continued support and guidance. The Directors also place on record their sincere thanks for the support and co-operation extended by the bankers and shareholders of the Company.

The Directors also thank the employees of the Company for their contribution toward the performance of the Company during the financial year.

On behalf of the Board

For Northern Arc Capital Limited

P S Jayakumar Ashish Mehrotra

Independent Director & Chairperson Managing Director & CEO

DIN: 01173236 DIN: 07277318

Date: September 30, 2024 Place: Chennai

1

Percentage increase in the median remuneration of employees in the financial year: 45%

• Number of permanent employees on the rolls of the company: 902 (as of March 31, 2024)

• Average percentage increase in the salaries of employees other than the KMP in FY 2023-24: 11%¹ and percentage increase in key managerial remuneration: 13%

• Affirmation that the remuneration is as per the remuneration policy of the company: The Company affirms that remuneration of directors and employees of the company is in accordance with the remuneration policy of the company.

• The average increase in salaries of employees based on performance appraisal during the last year.