Your Directors take pleasure in presenting the 41st Annual Report together with the audited financial statements of the Company for the financial year
ended March 31, 2025.

Financial Highlights INR in crores

Your Company has adopted Indian Accounting Standards (IND AS) notified
under Section 133 of the Companies Act, 2013 read with Companies
(Indian Accounting Standards) Rules 2015.

Industry Outlook

During the financial year 2024-25, the financial services industry had
to navigate a challenging environment marked by regulatory tightening
measures, particularly in response to concerns over overleveraging in
retail finance. Additionally, the rising cost of capital, resulting out of
tight liquidity conditions, posed further constraints. However, the tax
proposals announced in the Union Budget coupled with the interest rate
cuts by the Reserve Bank of India towards the end of the fiscal year are
expected to stimulate consumption and enhance credit flow, particularly
in sectors such as mortgage and vehicle financing. The Reserve Bank of
India, in its Monetary Policy Committee (MPC) meeting held in April 2025,
has also changed its stance from "neutral" to "accommodative" which
effectively means that going forward, absent any shocks, the MPC would
only consider two options - status quo or a rate cut. This is expected to
augur well for the economy as a whole with a spur towards investment and
consumption, and more specifically to the financial services sector since
the interest rates would continue to drop, which will be beneficial from the
perspectives of growth and profitability.

The overleveraging concerns, which initially impacted the unsecured
lending segment, have also had some impact on secured lending businesses
towards the later part of the financial year, prompting a cautious approach
across the industry. In response, NBFCs are strategically recalibrating
their business expansion plans to optimize risk-adjusted profitability and
maintain financial stability over the medium term.

State of the Company's Affairs/Overview
Company Overview

Your Company is a non-deposit taking Non-Banking Finance Company
(NBFC) registered with the Reserve Bank of India and is a NBFC -
Investment and Credit Company (NBFC-ICC). Your Company has been
classified as a NBFC in Middle Layer under the Reserve Bank of India
(Non- Banking Financial Company - Scale Based Regulation) Directions
dated October 19, 2023, as amended from time to time.

Your Company has been listed on the National Stock Exchange of India
Limited and BSE Limited since November 21, 2022.

Review of Operations

Your Company provides secured financial solutions to individuals carrying
on small businesses and self-employed individuals who often lack access
to formal credit channels and rely on informal sources for their financial
needs. To bridge this gap, your Company has developed a proprietary
underwriting model that effectively assesses borrowers' cash flows,
supported by rigorous monitoring and robust recovery mechanisms. This
approach enables your Company to cater to their credit requirements
while ensuring responsible lending practices.

By extending access to financial services, your Company facilitates the
transition of underserved borrowers into the formal financial ecosystem,
thereby helping them access structured credit, potentially lower interest
rates and flexible repayment options.

Your Company remains committed to fair and transparent lending and
collection practices, fostering long-term partnerships that empower
borrowers to achieve financial stability.

The detailed financial and operational performance of your Company is
comprehensively discussed in the Management Discussion and Analysis
Report, which forms part of this Annual Report.

Operational Metrics
Disbursements

During the financial year ended March 31, 2025, your Company disbursed
INR 4,969.66 crores as compared to INR 4,881.41 crores in the previous
financial year, reflecting a year-on-year (YOY) growth of approximately
1.81%. This reduction in disbursements was a conscious strategy adopted
by your Company to moderate its growth for the current financial year
primarily on account of the overleveraging concerns affecting the industry
coupled with regulatory guidance provided by the Reserve Bank of India
to all the lending institutions.

As of March 31, 2025, the average ticket size for disbursals stood at INR
3.58 lakh, compared to INR 3.42 lakh in the previous financial year.

Branch Metrics

Your Company operates across 10 states and 1 union territory, namely
Tamil Nadu, Puducherry, Karnataka, Andhra Pradesh, Telangana,
Maharashtra, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Rajasthan,
and Gujarat. During the financial year ended March 31, 2025, your

Company expanded its branch network to 748 branches, up from 520
branches in the previous year. This includes the establishment of the first
branch in Gujarat, contributing to the total number of newly added and
split branches.

This financial year has seen your Company strengthening its split branch
strategy wherein bigger branches with higher number of borrowers or
larger AUM are split into multiple branches in order to ensure strong risk
oversight. Out of the 228 Branches opened by your Company during the
year, 80 are fresh branches and 148 are branches added consequent to
the split branch strategy highlighted above.

To support future growth, your Company has strengthened its workforce,
ensuring a well-equipped team to meet rising demand. The strategic
implementation of the split-branch model has led to a stronger risk
management framework.

Your Company follows a well-defined branch expansion strategy, carefully
evaluating various risk parameters before establishing new locations.

The branch network details as of March 31, 2025, along with a comparative
analysis of the previous financial year, are provided below:

Financial Metrics

As of March 31, 2025, your Company reported Assets Under Management
(AUM) of INR 11,877.04 Crores, compared to INR 9,640.59 Crores in
the previous financial year, reflecting a year-on-year growth of 23.20%.
Revenue from operations stood at INR 2,866.02 crores, marking a Y-o-Y
growth of 30.56% compared to INR 2195.10 crores in FY 2024. The
average ticket size of loans ranged between INR 3-5 lakh.

Your Company seeks to be a responsible lender and in line with this
vision, during the Financial year ended March 31, 2025, your Company
also dropped its interest rates on incremental loans onboarded from
November 1, 2024. Interest rate on loans given for a 7-year tenure was
reduced from 24.5% to 21.5% - 22.50% depending upon the risk profile
of the borrower, as clearly outlined in the Interest Rate model approved by
the Board. Your Company would continue to keep a tab on the cost of its
borrowings and would accordingly decide the incremental lending rates in
the years to come.

To further enhance risk management and pricing efficiency, your Company
implemented risk-based pricing model during the year. This approach
considers multiple factors, including:

• Credit score of the primary applicant

• Customer leverage, as reflected in credit bureau reports

• Loan purpose, given its impact on risk weight

• Eligibility for priority sector benefits on borrowings

• Vintage of the collateral property offered

This structured approach ensures optimized risk-adjusted returns while
supporting credit access for deserving borrowers.

Asset Quality

Your Company maintains a robust collection and proactive recovery
management system, ensuring strong asset quality for the financial year
ended March 31, 2025. Despite some impact of the overleverage crisis on
secured loan lenders, your Company has ensured a strong asset quality,
with the Gross Stage 3 Assets at 1.79% which will be one of the lowest
among peers operating in this customer segment.

Your Company classifies assets into different stages based on expected
performance, following all applicable regulatory guidelines. Exposure at
Default (EAD) represents the total outstanding amount, including accrued
interest, as of the reporting date. For the financial year ended March 31,
2025, your Company reported Gross Stage 3 Assets and Net Stage 3
Assets (under the revised Income Recognition and Asset Classification
norms) at 1.79% and 0.88% respectively, compared to 1.38% and 0.63%
in the previous financial year.

While there is an uptick in the delinquency rate including NPA numbers,
it needs to be looked at from a contexual perspective. The trickling effect
of the overleverage crisis to secured lenders, especially during the second
half of the year, led to some increase in delinquency rates. However,
these numbers are significantly lower as compared to both secured and
unsecured lenders, and stand testimony to the robust underwriting model
and strong collections focus.

Prospects

The Indian credit market continues to offer significant growth
opportunities, particularly in lending to micro-entrepreneurs and self¬
employed individuals, who often face barriers in accessing formal financial
institutions. CRISIL estimates peg small ticket size secured (SORP -
Self Occupied Residential Property) MSME lending market potential at

'22 trillion. The number of players operating in this segment is less
lending to a lot of headroom available for lenders to grow in this segment.

As of March 31, 2025, your Company's Assets Under Management (AUM)
stood at INR 11,877.04 Crores, compared to INR 9,640.59 Crores in the
previous financial year, reflecting a year-on-year growth of 23.20%. While
the growth rate was slightly muted during the financial year ended March
31, 2025, it was primarily on account of other issues plaguing the industry
such as overleverage, etc and not on account of lack of market demand.

Resource Mobilization

Your Company maintains a well-diversified borrowing structure, leveraging
multiple funding sources including capital market borrowings, borrowings
from financial institutions (domestic and international) and banks.

At the shareholders' meeting held on September 13, 2024, a special
resolution under Section 180(1)(c) of the Companies Act, 2013, was
passed, authorizing the Board of Directors to raise borrowings exceeding
the aggregate of paid-up share capital and free paid-up share capital and
free reserves and securities premium, up to INR 10,000 Crores.

As of March 31, 2025, your Company's total outstanding borrowings stood
at INR 7,922 Crores, with the weighted average tenure of fresh loans
raised during the year being approximately 60 months

Your Company follows a prudent Asset-Liability Management (ALM)
strategy, ensuring optimal funding mix, loan tenures, and borrowing
timing to minimize financing costs and maintain liquidity.

New lenders and developments during the Financial Year 2024-25:
Total Borrowings and Term loan composition: During the financial year,
your Company raised fresh borrowings aggregating to INR 3,545 Crores,
including fresh term loans from banks and financial institutions amounting
to INR 2,795 Crores. As of March 31, 2025, total outstanding borrowings
stood at INR 7,922 Crores, with the weighted average tenure of fresh
loans at ~60 months.

During the year, your Company onboarded new lenders such as CSB Bank
Ltd., International Finance Corporation, SIDBI, HDFC Mutual Fund, HSBC
Mutual Fund, Kotak Mutual Fund and Nippon Mutual Fund. leading to a
well-diversified borrowing profile. The liability profile of your Company

has been structured in a way to support the business growth in the
forthcoming years.

Securitization: Your Company actively leveraged the Securitization (PTC)
market, enhancing liquidity, reducing the cost of funds and mitigating
asset-liability mismatches.

During the year, your Company securitized receivables worth INR 852.32
Crores, realizing a sale consideration of INR 750 Crores. All securitization
transactions complied with the RBI guidelines on the Securitization
of Standard Assets and were accounted for in accordance with Indian
Accounting Standards (Ind AS).

Debentures: Your Company issued fresh debentures aggregating to INR
500 Crores via private placement during the year. Further, your Company
has maintained timely servicing of interest and principal obligations for
the financial year ended March 31, 2025, ensuring full compliance with
the disclosure requirements under SEBI (LODR) Regulations, 2015.

Commercial Paper (CP)

Your Company did not issue any Commercial Papers or other short-term
instruments during the financial year ended March 31, 2025.

Statutory and Regulatory Compliances

Your Company remains committed to full compliance with all applicable
regulatory provisions, including those set forth by the Reserve Bank
of India (RBI), SEBI (LODR) Regulations, 2015, Companies Act, 2013,
Foreign Exchange Management Act (FEMA), 1999, Income Tax Act, 1961
and the rules and regulations framed thereunder.

Additionally, your Company has adhered to the applicable provisions of
Secretarial Standards issued by the Institute of Company Secretaries of
India (ICSI) for Board and General meetings held during the FY 2024-25.

Credit Rating

During the financial year, your Company's credit ratings were reaffirmed at
AA- (Double A Minus) with Stable outlook by ICRA, CARE Ratings Limited
and India Ratings & Research (Fitch Group).

As of March 31, 2025, your Company's borrowings hold the following
ratings:

Change in Nature of Business

There has been no change in the existing nature of business of your
Company during the financial year ended March 31, 2025.

Dividend

The Board of Directors at its meeting held on April 29, 2025 has
recommended a final dividend of INR 2/- per equity share (200% of face

value of INR 1/- per equity share and translating to a dividend payout ratio
of 5.5%) for the financial year ended March 31, 2025 to the shareholders
of the Company for approval at the ensuing 41st Annual General Meeting.

Dividend Distribution Policy

Your Company has adopted a Dividend Distribution Policy, which
provides a structured approach for determining dividend payouts. The

policy considers various internal and external factors, including financial
performance, growth strategy, regulatory requirements and prevailing
market conditions as evaluated by the Board of Directors. The policy is
available on our website at https://fivestargroup.in/investors/.

Transfer to Reserves

In compliance with the requirements under the Reserve Bank of India Act,
1934, your Company has transferred a sum of INR 214.5 Crores to the
statutory reserves during the financial year ended March 31, 2025.

Deposits

Your Company operates as a non-deposit taking entity and has not
accepted any public deposits during the financial year ended March 31,
2025, In accordance with applicable regulatory requirements.

Capital Adequacy Ratio

As of March 31, 2025, your Company's Capital Adequacy Ratio stood
at 50.10%, well above the minimum regulatory requirement of 15% as
stipulated by the Reserve Bank of India (RBI).

Additionally, your Company has carried out an Internal Capital Adequacy
and Assessment Process (ICAAP), confirming that it remains adequately
capitalized to support its business objectives and risk profile.

Share Capital
Authorised Capital

During the financial year, there has been no change in the Authorised
Capital of the Company. The Company has only one class of equity shares
and the authorised share capital of the Company as on March 31, 2025,
was INR 55,00,00,000 divided into 55,00,00,000 equity shares of INR 1
each.

Issued, Subscribed and Paid-up Share Capital

During the financial year under review, your Company has allotted
19,77,880 fully paid-up equity shares under various ASOP schemes.
4,060 fully paid -up equity shares under Five-Star Associate Stock Option
Scheme 2015 and 19,73,820 fully paid -up equity shares under Five-Star
Associate Stock Option Scheme 2018 were allotted during the financial
year under review.

Issue and allotment of convertible warrants

Pursuant to the applicable provisions of the Companies Act 2013, SEBI
(Issue of Capital and Disclosure Requirements), Regulations, 2018
and SEBI (Listing Obligations and Disclosure Requirements), 2015,
the Board of Directors at its meeting held on August 17, 2024 and the
Shareholders at the Annual General Meeting held on September 13, 2024
had approved the issuance of up to 410,000 convertible Share Warrants
of INR 1.00 each at a premium of INR 769.00 on Preferential basis to
Mr. Lakshmipathy Deenadayalan, Promoter and Chairman & Managing
Director, Mr. Rangarajan Krishnan, Joint Managing Director & CEO and Mr.
Srikanth Gopalakrishnan, Joint Managing Director & CFO ("Allotees") . The
Company had received the in-principle approval from BSE and NSE in this
regard.

The Company has received upfront consideration of 25% of the issue
proceeds and the Board had accordingly approved the allotment of Share
warrants on Preferential basis to Allotees on October 24, 2024.

Subsidiaries, Joint Ventures, Associate Companies

Your Company does not have any Subsidiary/Associate/ Joint Venture
Company. Also, during the financial year, your Company has not formed/
incorporated/become/ceased to be a Subsidiary/Associate/Joint Venture
Company.

Related Party Transactions

Your Company has in place a policy on related party transactions, as
approved by the Board, which is available on the website of the Company
at https://fivestargroup.in/investors/.

During the financial year, all related party transactions were entered
into at arm's length and in the ordinary course of business. There were
no materially significant transactions with Promoters, Directors, Key
Managerial Personnel (KMP) or other designated persons that could have
potential conflicts of interest with the Company.

Further, no contracts or arrangements were entered into with related
parties that require disclosure in Form AOC - 2 under Section 188 (1) and
134 (3) (b) of the Companies Act, 2013.

All proposed transactions with the related partes were pre-approved by
the Audit Committee at the beginning of each financial year/quarter and
subsequently reviewed on a quarterly basis.

Employee Stock Option Schemes

Your Company has adopted ASOP schemes in compliance with the
Securities and Exchange Board of India (Share Based Employee Benefits
and Sweat Equity) Regulations, 2021 (SEBI (SBEB) Regulations) and the
Companies Act, 2013.

Currently, your Company has formulated following ASOP schemes:

1. Five-Star Associate Stock Option Scheme 2015 (ASOP 2015)

2. Five-Star Associate Stock Option Scheme 2018 (ASOP 2018) and

3. Five Star Associate Stock Option Scheme 2023 (ASOP 2023)

Approval and Implementation

• ASOP 2015 : Approved by the Board of Directors on September 18,
2015 and by the shareholders at the Extraordinary General Meeting
(EGM) on April 12, 2016 and later ratified in the Annual General Meeting
held on September 16, 2023.

• ASOP 2018: Approved by the Board of Directors on February 28, 2018
and by the shareholders at the Extraordinary General Meeting held on
March 26, 2018. It was subsequently ratified at the Annual General
Meeting held on September 16, 2023.

• ASOP 2023: Approved by the Board of Directors on August 16, 2023 and
by the shareholders at the Annual General Meeting held on September
16, 2023.

There have been no material changes to these schemes during the
financial year ended March 31, 2025.

A certificate from secretarial auditor M/s S Sandeep & Associates,
Practicing Company Secretaries confirming the implementation of ASOP
schemes in accordance with SEBI (SBEB) Regulations and shareholders
resolutions, will be available for inspection of shareholders at the ensuing
annual general meeting.

In compliance with Regulation 14 of SEBI (SBEB) Regulations, disclosures
regarding ASOP 2015, ASOP 2018 and ASOP 2023 have been provided on
the website of the Company at www.fivestargroup.in.

Annual Return

The Annual Return in form MGT 7 referred to in Section 134(3)(a)
and Section 92(3) of the Companies Act, 2013 read with Companies
(Management and Administration) Rules, 2014 and Regulation 62(1)(k)
of the SEBI (LODR) Regulations, 2015 is available on the website of the
Company at https://fivestargroup.in/investors/.

Particulars of Loans, Guarantees or Investments

The Company being an NBFC, the disclosures regarding particulars of
loans given, guarantees given and security provided is exempted under
Section 186(11) of the Companies Act, 2013. With regard to Investments
made by the Company, the details are provided in note no.7 of the financial
statements.

Material Changes Affecting the Financial Position of the Company

There are no material changes and commitments having an adverse
bearing on the financial position of the Company between March 31,
2025, and the date of this report.

Information as per Section 134(3)(m) of the Companies Act, 2013

The provisions related to and technology absorption under Section
134(3)(m) of the Companies Act, 2013 do not apply to our Company as
your Company is not a manufacturing entity. However, Your Company is
committed to increasing the use of information technology and promoting
resource conservation in its operations.

During the financial year ended March 31, 2025, the Company incurred
foreign currency expenditure of INR 4.58 crores with no foreign currency
earnings.

Information as per clauses (xi) and (xii) of Rule 8(5) of the Companies
(Accounts) Rules, 2014

There was no application made or any proceeding pending under the
Insolvency and Bankruptcy Code, 2016 during the financial year ended
March 31, 2025.

The Company has not entered into any one-time settlement with its
lenders during the financial year ended March 31, 2025, and therefore
the requirements of clause (xii) of Rule 8(5) of the Companies (Accounts)
Rules, 2014 are not applicable.

Significant and Material Orders passed by the Regulators or Courts
or Tribunals

There are no significant and material orders passed by the Regulators or
Courts or Tribunals impacting the going concern status of your Company's
and its future operations.

Agreements binding on listed entities

There are no agreements between shareholders, promoters, related
parties, Directors, or employees, either amongst themselves or with the
Company, impacting management control, restrictions or liabilities that
require disclosure to Stock Exchanges. This includes agreements with the
listed entity, holding companies, subsidiaries, or associates.

Risk Management

Your Company has established a comprehensive Risk Management
Framework designed to identify, assess, and mitigate risks associated with
its operations. This framework is supported by a Risk Management Policy,
which outlines the governance structure, risk classification, mitigation
strategies, and the role of the Chief Risk Officer (CRO) in overseeing risk-
related functions.

The Risk Management Committee (RMC) is responsible for monitoring
and reviewing the Company's risk management initiatives. In compliance
with the Reserve Bank of India (RBI) Master Directions and SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015, the RMC
regularly evaluates key risks and ensures the effective implementation of
risk-mitigation strategies.

The adequacy of internal financial controls concerning financial statements
has been assessed, and details are provided in the Management Discussion
and Analysis section of this Report.

Risk Management Approach

Your Company acknowledges that a well-defined risk management
approach is essential for sustainable growth. Accordingly, robust policies,
systems, and processes have been implemented to manage various risk
categories, including credit risk, operational risk, market risk (interest rate
and liquidity), and reputational risk.

Key Risk Mitigation Measures
Credit Risk Management:

• A muiti-iayered underwriting process that includes comprehensive
credit bureau checks, field investigations and adherence to the "3 Cs"
framework-verification of Character, Cash Flow and Collateral, before
the sanction of a loan.

• Stringent verification procedures, prudent ioan-to-vaiue (LTV) ratios
and a conservative debt service capacity analysis to ensure borrower
creditworthiness.

• Legal due diligence and robust documentation to safeguard lending
practices.

Risk Oversight & Governance:

The Risk Management Committee (RMC) ensures continuous monitoring
of credit risk, portfolio performance and operational risks, providing
strategic direction to mitigate potential threats.

A dedicated Chief Risk Officer (CRO) oversees risk identification,
measurement, and control, ensuring timely risk reporting to the RMC,
Board and the management.

Market & Liquidity Risk Management:

The Asset Liabiiity Committee (ALCO) activeiy manages iiquidity risk and
interest rate exposures to maintain financiai stabiiity.

A weii-diversified funding strategy ensures optimal liquidity planning.

Fraud Risk Management:

In accordance with RBI Master Directions, a Committee of Executives
for monitoring and follow up of fraud cases (Fraud Risk Management
Committee) has been constituted to proactively identify, monitor, and
mitigate fraud risks by reviewing early warning signals and strengthening
preventive mechanisms.

Your Company remains committed to enhancing its risk management
framework to adapt to evolving business dynamics and regulatory
landscapes. A continuous review mechanism ensures that risks are
effectively mitigated while maintaining a resilient operational model

Human Resource Development

Your Company firmly believes that its employees are the cornerstone of
its success. A dynamic and highly skilled workforce is critical to achieving
business excellence and therefore, your Company remains committed to
attracting, developing and retaining top talent through strategic initiatives,
robust training programs and a competitive compensation structure.

Talent Acquisition & Retention

Your Company places a strong emphasis on building a high-performing
workforce by continuously identifying and onboarding skilled professionals
across business verticals. A weii-defined talent retention strategy
ensures that employees are offered growth opportunities, competitive

pay packages with an appropriate mix of fixed and variable components,
career progression pathways and an engaging work environment that
fosters long-term commitment.

Optimizing Workforce Efficiency

To enhance operational efficiency, your Company undertook a detailed
workforce assessment, aligning staffing levels with business expansion,
customer acquisition strategies and market demands. This data-driven
approach ensures that every function—from frontline sales and credit
assessment to collection and customer service— is optimally staffed while
maintaining a lean and agile organizational structure.

Employee Development & Skill Enhancement

Your Company remains deeply invested in employee capability-building
initiatives, offering a blend of classroom training (as deemed appropriate),
on-the-job learning and specialized certification programs. Training
modules are tailored to strengthen customer engagement, credit
evaluation, risk assessment, regulatory compliance (including KYC &
Fair Practices Code certifications) and leadership development. Digital
learning platforms and structured mentorship programs further reinforce
the Company's commitment to nurturing future leaders.

During the financial year under review, your Company also launched
an Employee Learning Platform, which is designed to empower the
employees with knowledge and skills that would enhance their work
experience and career growth. This platform would be enhanced with
learning modules from various functions which will help employees get an
all-round experience of the various functional areas within the Company.

Competitive Compensation & Rewards

To attract and retain top-tier professionals, your Company continuously
benchmarks its compensation and benefits structure against industry
standards. A well-structured performance-linked incentive framework
motivates employees to excel, while initiatives focused on work-life
balance, career advancement and employee well-being enhance overall
job satisfaction.

As of March 31, 2025, your Company had 11,934 employees across its
branches, regional offices and corporate headquarters, each playing a
pivotal role in driving the Company's growth trajectory.

Your Company remains committed to fostering a culture of collaboration,
innovation and excellence, ensuring that its people continue to be the
driving force behind its sustained success.

Board of Directors

Your Company maintains a well-balanced and diverse Board in
compliance with Section 149 of the Companies Act, 2013 and Regulation
17 of SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015. The Board comprises an optimal mix of executive, non-executive
and Independent Directors, including a Woman Independent Director,
ensuring a broad spectrum of expertise, strategic insight, and corporate
governance best practices.

The Board members bring extensive industry experience, leadership
acumen and a commitment to upholding the highest standards of integrity
and governance. Their collective expertise spans diverse domains,
enabling well-informed decision-making that aligns with the Company's
long-term vision and stakeholder interests.

To facilitate seamless participation, the Company provides video
conferencing and other audio-visual means for Board meetings, in
accordance with Section 173(2) of the Companies Act, 2013, read with
Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014.
This ensures that Directors can actively contribute to discussions and
deliberations, even when unable to attend meetings in person.

Your Company remains committed to fostering an engaged, forward¬
thinking and highly effective Board that drives sustainable growth and
governance excellence.

The Board of Directors comprises 8 (eight) Directors, including 4 (four)
Independent Directors (one of whom is a woman), [1 (one)] Non-Executive
Director, and 3 (three) Executive Directors (Chairman & Managing Director,
Joint Manging Director &CEO and Joint Managing Director & CFO), as of
March 31, 2025. Details on the Board composition are provided below:

Changes in Board during the Financial Year

The following changes took place in the composition of the Board of
Directors during the Financial Year 2024-25 under review.

New Appointments

Based on recommendation of Nomination and Remuneration Committee,
Mr Rangarajan Krishnan (DIN: 07289972) has been appointed as
an additional Director in the category of Joint Managing Director of
the Company by the Board at its meeting held on August 17, 2024.
Subsequently the shareholders of the Company at the Annual General
Meeting held on September 13, 2024 approved the appointment as Joint

Managing Director for a period 5 years effective from August 17, 2024.
Further Mr. Rangarajan Krishnan was re-designated as Joint Managing
Director & CEO.

Based on recommendation of Nomination and Remuneration Committee,
Mr Srikanth Gopalakrishnan (DIN:10636810) has been appointed as
an additional Director in the category of Joint Managing Director of
the Company by the Board at its meeting held on August 17, 2024.
Subsequently the shareholders of the Company at the Annual General
Meeting held on September 13, 2024 approved the appointment as Joint
Managing Director for a period of 5 years effective from August 17, 2024.

Further Mr. Srikanth Gopalakrishnan was re-designated as Joint Managing
Director & CFO

Details relating to their appointments are available on the website of the
Company www.fivestargroup.in and stock exchanges viz www.bseindia.
com and www.nseindia.com.

Resignations

Mr Vikram Vaidyanathan (DIN: 06764019), non-executive Director
representing Matrix Partners India Investment Holdings II, LLC had
stepped down from the Directorship with effect from the close of the
business hours of April 30, 2024. There are no other material reasons
other than what has been stated in his resignation letter.

During the financial year under review, Mr G V Ravishankar (DIN:
02604007), non-executive director representing Peak XV Partners
Investments V had stepped down from the Directorship with effect from
the close of the business hours of April 30, 2024. There are no other
material reasons other than what has been stated in his resignation letter.

Details relating to their resignations are available on the website of the
Company www.fivestargroup.in and stock exchanges viz www.bseindia.
com and www.nseindia.com.

There was no changes in the Composition of Board between the end of
Financial Year 2024-25 and the date of this report.

Changes in Board after the Financial Year
Director Retiring by Rotation

In accordance with Section 152(6) of the Companies Act, 2013 and the
Articles of Association of the Company, at least one-third of the Directors,
excluding Independent Directors, are required to retire by rotation at
every Annual General Meeting (AGM).

Pursuant to said provision , Mr Thirulokchand Vasan (DIN: 07679930)
is liable to retire at the 41st Annual General Meeting (AGM) and being
eligible, has offered himself for reappointment. The Board recommends
his reappointment for the approval of the shareholders.

Key Managerial Personnel

During the financial year under review, Ms Shalini Baskaran had resigned
as Head-Compliance & Company Secretary and Compliance Officer of the
Company, with effect from the close of business hours of February 26,
2025 and Mr Vigneshkumar SM was appointed as the Company Secretary
and Compliance Officer with effect from February 27, 2025. There are no
other material reasons other than what has been stated in her resignation
letter.

Pursuant to the provisions of Section 203 of the Companies Act, 2013
read with the rules made there under, the following employees are the
whole- time key managerial personnel of the Company as on March 31,
2025:

a) Mr Lakshmipathy Deenadayalan, Chairman and Managing Director
(DIN: 01723269)

b) Mr Rangarajan Krishnan, Joint Managing Director and Chief Executive
Officer (DIN: 07289972)

c) Mr Srikanth Gopalakrishnan, Joint Managing Director and Chief
Financial Officer (DIN: 10636810)

d) Mr. Vigneshkumar SM, Company Secretary and Compliance Officer
There was no changes in the composition of Key Managerial Personnel (KMP)
between the end of Financial Year 2024-25 and the date of this report.

Declaration from Independent Directors

Pursuant to Section 149(7) of the Companies Act, 2013 read along with
Rule 6 of the Companies (Appointment and Qualifications of Directors)
Rules, 2014 of the Companies Act, 2013 and Regulation 25(8) of the
SEBI (LODR) Regulations, 2015, the Company has received necessary
declarations/ disclosures from each of the Independent Directors of
the Company stating that he/she meets the criteria of independence as
required under Section 149(6) of the Companies Act, 2013 and that he/
she has a valid certificate of registration for his/her enrollment into the
data bank for Independent Directors.

In the opinion of the Board of Directors, the Independent Directors of
your Company satisfy the necessary attributes as to integrity, experience
(including proficiency) and high levels of skill and expertise.

Compliance with Secretarial Standards

During the Financial year under review, the Company has complied with
all applicable Secretarial Standards issued by The Institute of Company
Secretaries of India and adopted under the Act.

Formal Annual Evaluation

In compliance with the Companies Act, 2013, SEBI (LODR) Regulations,
2015 and the Company's Directors Appointment, Remuneration and
Evaluation Policy, the Board carried out a formal annual evaluation of
its own performance as well as the performance of individual Directors,
including the Chairman and its various Committees.

This structured assessment was carried out based on the predefined
evaluation criteria set forth in the Directors Appointment, Remuneration
and Evaluation Policy. The said policy is available on the website of the
Company at https://fivestargroup.in/investors/.

Additionally, the performance evaluation of Independent Directors was
carried out by the entire Board. The Independent Directors in a separate
meeting held during the year, reviewed the performance of Non¬
Independent Directors (including Chairman) and assessed the overall
effectiveness of the Board. Key areas of evaluation included the quality,
timelines and adequacy of information exchange between Management
and the Board. The evaluation process was conducted through a secure
digital platform, ensuring transparency and confidentiality.

Internal Financial Controls

Your Company maintains a comprehensive Internal Financial Control
(IFC) framework , supported by well-defined policies and processes to
uphold the highest standards of integrity, transparency and corporate
governance. These controls are designed to :

• Facilitate efficient business operations and policy compliance.

• Safeguard corporate assets against misuse or unauthorized access.

• Prevent and detect fraud and Financial irregularities.

• Ensure accurate and complete financial records.

• Ensure timely preparation of reliable financial information.

To strengthen its control environment, the Company has established clear
delegations of authority, standard operating procedures (SOPs) and risk
control matrices. These measures are regularly reviewed at multiple
levels. Independent testing of control measures is conducted periodically
to ensure continued compliance with regulatory and operational
requirements.

An independent consulting firm provides ongoing support in updating risk
control metrics, test plans and independent assessment procedures. The

findings and recommendations from these evaluations are periodically
presented to the Audit Committee for review and necessary action.

Additionally, the Company has built a robust Internal Audit mechanism,
with regular audits conducted by both in- house Internal Audit team and
External Internal Auditors. The Audit Committee closely monitors financial
controls, risk management, compliance and operational procedures,
reviews audit findings and ensures implementation of corrective actions
wherever necessary.

Auditors and Auditor's report
Statutory Auditors

During the financial year under review, the tenure of M/s S R BatLiboi &
Associates LLP as Statutory Auditor of the Company concluded at the 40th
Annual General meeting (AGM) held on September 13, 2024.

In compliance with the Reserve Bank of India's Guidelines on appointment
of Statutory Auditor by Non-Banking Financial Company vide Circular
RBI/ 2021-22/25 Ref. No. DoS. CD.ARG/ SEC.01/ 08.91.001/ 2021-22
dated 27th April, 2021 and pursuant to Section 139 of the Act and the
Companies (Audit and Auditors) Rules, 2014, the shareholders approved
the appointment of M/s Deloitte Haskins & Sells, Chartered Accountants
(FRN:008072S) as the new Statutory Auditors at the AGM held on
September 13, 2024 for a term of three consecutive financial years viz.
2024-25, 2025-26 and 2026-27 (i.e from the conclusion of the 40th AGM
till the conclusion of the 43rd AGM). The appointment remains subject to
the satisfaction of eligibility criteria on annual basis.

Statutory Auditors Report on Financial Statements

The statutory audit report is annexed with the financial statements and
forms a part of this report. The report indicates a clean audit with no
qualifications, reservations, adverse remarks, or disclaimers.

Fraud Reported by Auditors

There were no instances of frauds reported by the Statutory Auditors
during the financiaL year ended March 31, 2025 under Section 143(12) of
the Companies Act, 2013.

Audit Trail

Effective April 1, 2023, Sections 128 and 143(3)(j) of the Companies
Act, 2013 rule 3(1) of Companies (Accounts) Rules, 2014 and rule 11(g)
of Companies (Audit and Auditors) RuLes, 2011 require the auditor of a
Company to report whether the accounting software used by the Company
to maintain books of account has an audit trail feature.

An audit trail is a chronological, date, and time-stamped record of a
specific transaction from the time its entry is made in the accounting
software through various changes to it.

Your Company has 2 software in respect of which audit trail reporting
becomes applicable - the accounting software and the customer loan
management software.

Your Company uses Oracle Fusion as its accounting software and Finnone
Neo as its Customer Loan Management software. Both these are very
well acclaimed software; Oracle Fusion is used by many players for their
General Ledger requirements, both in the financial services industry and
outside. Finnone Neo is an LMS that is used by large NBFCs and banks
to manage their loan portfolios. These software come with lots of inbuilt
controls to ensure that the transactions made reflect the financial and
loan positions accurately.

Both these software have an in-built audit trail feature which had been
enabled both application and database level for the financial year ended
March 31, 2025. There was a brief period i.e. from April 1, 2024 to May
23, 2024 when the audit trail in respect of accounting software was not
enabled at the database level. There was no issue with respect to the
enablement of audit trail for the accounting software at an application
level and that was enabled and operated effectively throughout the year.

This has also been brought out by the Statutory Auditor in their Auditors'
report of the financiaL statements.

Notwithstanding the above, the Auditors Report does not contain any
qualifications, and they have also confirmed adequacy of Internal
Financial Controls in your Company.

Internal Auditor

To ensure the effectiveness of internal control systems, your Company
maintains a robust internal audit system, combining an external audit
firm viz. M/s Sundaram & Srinivasan, Chartered Accountants with an in¬
house team. This comprehensive approach ensures thorough review of all
operations of the Company regularly. The audit teams regularly assess the
adequacy of control measures and recommend improvements as needed.
The Audit Committee oversees the internal audit functions, scope of
internal audit and reviews its effectiveness.

Secretarial Auditor

M/s S Sandeep & Associates, Practicing Company Secretaries were
appointed to conduct the secretarial audit of the Company for the
financiaL year 2024-25, as required under Section 204 of the Companies
Act, 2013 and rules made thereunder and Regulation 24A of SEBI (LODR)
Regulations, 2015. The secretarial audit report for the financial year
ended March 31, 2025, forms part of this report as Annexure A and does
not contain any qualification, reservation or adverse remarks.

Further, pursuant to Regulation 24A of SEBI (LODR) Regulations 2015, the
Board of Directors, based on recommendation of the Audit Committee, has
recommended to the shareholders for approval, the appointment of M/s
S Sandeep & Associates, Practicing Company Secretaries, as Secretarial
Auditors of the Company for a term of 5 (five) consecutive years from FY
2025-26 to FY 2029-30. The resolution seeking approval of Members
forms part of the Notice of AGM.

Cost Records and Cost Audit

The provisions for maintaining cost records and undergoing a cost audit,
as per Section 148(1) of the Companies Act, 2013 are not applicable to
your Company's business activities.

Information Technology

Technology plays a vital role in every Company's business strategy and
operations. In line with this, your Company has implemented a robust
IT framework that supports seamless business processes across all
functions—from sourcing, underwriting, loan approvals, disbursements,
coLLections and back-office operations, providing a unique experience to
all stakeholders along with high levels of security and privacy

Your Company has made significant investments in technology and is
committed to ongoing investments in technology, enabling higher levels
of efficiency, effectiveness, regulatory compliance, competitive advantage
and innovation. This includes deploying world-class software for all core
operations of the Company and for frictionless scaling, leveraging third

party API infrastructure for digitization and interoperability, using data
analytics and machine learning for underwriting and portfolio analysis in
addition to building a robust credit scoring model, and investing in tools
for appropriate business continuity and security. These initiatives have
enabled us in making faster and more effective decisions, improved our
customer engagement and shortened turnaround times.

Further, as of the financial year ended March 31, 2025, your Company
has implemented state of the art systems for Loan Origination and
Underwriting, Accounting and General Ledger, Human Resources, Treasury
and Compliance. These systems bring in enhanced operational efficiency,
sophisticated financial reporting framework, completely automated
compliance structure, strong HR Management systems, and have brought
in system-based controls & efficiencies to treasury operations. Your
Company would continue to constantly evaluate these systems and their
appropriateness to the Company's operations. Necessary enhancements
and upgrades would be done periodically to ensure that these systems
remain robust enough to take care of the fast paced changes taking place
in the technology domain.

As stated above, your Company would continue to make necessary
investments in technology towards the following areas:

• Deploying the most appropriate software and applications to drive
higher automation and operational efficiencies, digitization of the value
chain and enhanced user experience.

• Leveraging data of high quality and integrity for analysing patterns and
aiding strategic and operational decision making

• Using newer digital technologies, including Machine Learning, AI and
language models for customer scoring which will all aid in better risk
management.

More details have been provided in the Management Discussion and
Analysis report.

On the infrastructure part, the IT Strategy Committee of the Company
has established comprehensive policies related to IT governance, asset
management, business continuity, outsourcing, information security
and cybersecurity, and incident management, among others. Given
the heterogenous footprint of technologies and IT systems as well as
integration of systems with external partners, the IT Strategy Committee
periodically reviews the enterprise architecture for dependencies and
interoperability and conducts regular vulnerability assessments and
penetration testing to identify and minimize any internal or external
threats. An independent information systems audit was also conducted
during the year, the findings of which are elaborately discussed, and
actions are taken within defined timelines.

Corporate Social Responsibility (CSR)

Your Company is committed to fulfilling its social responsibility obligations.
Your Company has adopted a CSR Policy as mandated by the Companies
Act, 2013 read with the Companies (Corporate Social Responsibility
Policy) Rules, 2014. The policy is available on the on the 'website of the
Company at https://fivestargroup.in/investors/.

As per aforesaid provisions of the Companies Act, 2013, your Company
was required to spend INR 17.03 crores towards CSR initiatives,
representing 2% of the average net profits of the Company from the
past three financial years. Your Company has exceeded this requirement
by contributing INR 17.04 crores towards CSR during the financial year
ended March 31, 2025.

The Annual Report on CSR activities for the financial year ended March 31,
2025, is attached as Annexure B to this Report.

Nomination and Remuneration Policy

The Company has in place the Appointment, Remuneration & Evaluation
Policy that is recommended by the Nomination and Remuneration
Committee and approved by the Board. The salient features of the
policy include a) role of Nomination and Remuneration Committee b)
Appointment and removal of Director, Key Managerial Personnel and Senior
Management c) Remuneration of Executive/Non-Executive Directors and
Key Managerial Personnels and Senior Management d) Principles of pay
structures and e) malus and claw back provisions. The policy is being
reviewed and approved by the Nomination and Remuneration Committee
and the Board of Directors annually. The policy is available on the website
of the Company at https://fivestargroup.in/investors/.

Whistle Blower Policy and Vigil Mechanism

As per the provisions of Section 177(9) of the Companies Act, 2013, and
Regulation 22 of the SEBI (LODR) Regulations, 2015, your Company has
established a Vigil Mechanism and has adopted a Whistle Blower Policy
for Directors and employees to report their genuine concerns. The Whistle
Blower Policy has been formulated with a view to providing a mechanism
for employees and Directors to approach the Audit Committee of the
Company. The said policy is available on the website of the Company at
https://fivestargroup.in/investors/.

The Vigil mechanism of the Company is overseen by the Audit Committee
and provides adequate safeguard against victimization of employees and
Directors and also provides direct access to the Chairperson of the Audit
Committee in exceptional circumstances.

During the financial year, no complaints were received by the Company
and no complaints are outstanding as on March 31, 2025

Board and its Committees

During the financial year ended March 31, 2025, 7 (Seven) Board Meetings
were held on April 30, 2024, July 31, 2024, August 17, 2024, October 29,
2024, December 24, 2024, January 31, 2025, and March 17, 2025, and
not more than 120 days elapsed between any two meetings.

The details of the composition of the Board and its Committees, terms of
reference of the Committees and the details of meetings held during the
financial year are furnished in the Corporate Governance Report.

Management Discussion and Analysis

The Management Discussion and Analysis (MDA) Report, providing
a comprehensive overview of the Company's business performance,
industry trends, opportunities and risks , is attached as Annexure C and
forms an integral part of this report.

Corporate Governance

Your Company remains steadfast in its commitment to upholding the
highest standards of Corporate Governance, ensuring adherence to all
applicable laws and regulations. A detailed Corporate Governance report
is enclosed as Annexure D and forms part of this report.

As required under Regulation 17 (8) of SEBI (LODR) Regulations, 2015,
the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) have
submitted a compliance certificate to the Board, confirming the accuracy
of financial statements and compliance with regulatory requirements.

Additionally, a Certificate from a Practicing Company Secretary, affirming
the compliance with Corporate Governance norms under SEBI (LODR)
Regulations, 2015, is annexed to the Corporate Governance report.

Business Responsibility and Sustainability Reporting

As per Regulation 34(2)(f) of SEBI (LODR) Regulations, 2015, the top
1,000 (one thousand) listed entities based on market capitalization
shall attach a Business Responsibility and Sustainability Report (BRSR)
as part of their Annual Report, describing the environmental, social and
governance initiatives undertaken by the listed entities.

In line with this regulation, your Company has put together a BRSR report
(along with an Environmental, Social & Governance (ESG) report) which
outline the initiatives undertaken by your Company across these 3 key
parameters. The BRSR report also forms part of this report as Annexure E.

As per the applicable criteria, BRSR Core & Assurance is not applicable to
your Company for FY 2025.

Disclosures under POSH Act, 2013

The Company has in place a policy for Prevention of Sexual Harassment
at the workplace in accordance with the Sexual Harassment of Women
at the Workplace (Prevention, Prohibition and Redressal) Act, 2013
(POSH Act). This policy is available on the website of the Company at
https://fivestargroup.in/investors/.

The Company has constituted Internal Complaints Committees (ICC) as
mandated by the POSH Act to address and resolve any complaints related
to workplace harassment.

During the financial year, no complaints were received and no outstanding
complaints as on March 31, 2025.

Particulars of Employees and Related Disclosures

In accordance with Section 197(12) of the Companies Act, 2013, read
with Rule 5(1) of the Companies (Appointment and Remuneration
of Managerial Personnel) Rules, 2014, disclosures related to the
remuneration of Directors, Key Managerial Personnel and employees are
provided in Annexure F of this report.

Further, details of employees as required in terms of Section 197 of the
Act read with Rule 5(2) and Rule 5(3) of the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014, are available for
inspection at the Registered Office of the Company during working hours
for a period of 21 days prior to the Annual General Meeting. In accordance
with Section 136 of the Act read with the said Rule, this statement is
not included in the Directors' Report sent to the shareholders. However,
members interested in obtaining a copy may request for the same by
e-mailing the Company secretary.

Investor Relations

Your Company remains committed to transparent communication and
proactive engagement with investors, analysts and stakeholders. By
fostering an open and informed dialogue, your Company ensures clarity
and accessibility in financial and operational disclosures.

Key investor engagement initiatives include:

• Website Disclosures: AH relevant investor-related information are
promptly published on the Company's website to ensure easy and
unrestricted access.

• Stock Exchange Notifications: Timely and proactive disclosures
to stock exchanges regarding earnings calls, quarterly and annual
financial results and material developments that could impact the value
of securities.

• Investor and Analyst Meetings: The Company regularly discloses
to stock exchanges details of scheduled interactions with investors
and analysts who wish to engage with the management team of the
Company.

Your Company strongly believes that informed investors contribute to
a well-functioning capital market and remains dedicated to equipping
stakeholders with the information needed to make sound investment
decisions.

Directors' Responsibility Statement

The Board of Directors have instituted / put in place a framework of
internal financial controls and compliance systems, which is reviewed by
the management and the relevant Board Committees, including the Audit
Committee and independently reviewed by the auditors.

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of
Directors, 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 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
this Act 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, which are
adequate and 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.

Acknowledgement

Your Directors wish to thank the shareholders, customers, employees,
bankers, non-bank lenders, mutual funds, financial institutions, debenture
trustees, R&T agents, credit rating agencies and auditors for their co¬
operation and continued support to the Company. The Directors also
thank the employees for their contribution during the financial year ended
March 31, 2025.

For and on behalf of the Board of Directors

Lakshmipathy Deenadayalan

Place: Chennai Chairman & Managing Director

Date: April 29, 2025 DIN: 01723269