MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Company is a Non Deposit Taking Non Banking Financial Company registered with the Reserve Bank of India under the category of Loan Company. The principle business of the Company consists of Loans against shares, IPO / FPO retail applications funding and margin trading. As a part of business expansion, the Company is proposing to enter into the business of Investment Advisory and has got itself registered with the Securities and Exchange Board of India.

I. Industry Structure and Developments

Non Banking Financial Companies (NBFCs) form an integral part of the Indian financial system. They play an important role in nation building and financial inclusion by complementing the banking sector in reaching out credit to the unbanked segments of society, which form the cradle of entrebrneurship and innovation. NBFCs' ground-level understanding of their customers' profile and their credit needs gives them an edge, as does their ability to innovate and customise products as per their clients' needs. This makes them the perfect conduit for delivering credit to the various customers.

The NBFC sector in India has undergone a significant transformation over the past few years. It has come to be recognized as one of the systemically important components of the financial system and has shown consistent year-on-year growth. Further, NBFCs play a critical role in the core development of infrastructure, transport, employment generation, wealth creation opportunities and financial support for economically weaker sections.

We believe that strong urban demand and an increase in credit penetration will continue to drive the growth in the consumer finance segment. Driven by higher disposable incomes through increased effectiveness of government schemes and the 7th Pay Commission, we remain confident of healthy growth in the consumer finance segment.

II. Opportunities and Threats

The Board feels that the biggest opportunities available to any organization are attainable actions that it have not yet taken, or maximized. Financially speaking, these opportunities may include increased income and investments; debt and interest reduction and positive industry trends. While difficult at first, one almost always can find opportunities when he really thinks about all of the directions he could take his finances. However, one should not necessarily pursue the most lucrative opportunity. You may have a better chance leveraging your strengths to pursue the best fit. The other opportunities include low cost & efficient labour force, strong managerial capabilities, strong globalised industries & emerging global competitiveness, untapped rural demand etc.

The entity compiles all of the threats, or factors that threaten its financial situation. These are external forces over which the entity may not always have control. The Board determines does the Company offer lower prices / interest rates, better service or a greater selection of products and also considers what the competitors do better? The Board further determines which ones pose the greatest threat to the business of the Company and finds ways to counteract them. The Board follows mindset that since one could never brvent every single threat, instead he must seek to mitigate as many of these risks as possible. The threats coming into the way of business of the Company mainly include high rates of taxes, market fluctuation, global slowdowns affecting Indian economy, competitions, governance issues etc.

III. Segment-wise / Product-wise Performance

The Company is engaged in single segment of finance and thus separate segment wise performance details can't be given. As for the product wise performance, the Board wish to inform that the margin funding income has shown an increase of 66.10% over the brvious financial year. For the financial year ended on March 31, 2016, the interest income from IPO / FPO funding stands at Rs.8,31,046/- which is 297.26% higher than that as of March 31, 2015. Interest income from loan against shares was also increased by 163.61% i.e. from Rs. 1,04,53,621/- to Rs. 2,75,56,310/- during the financial year under report.

IV. Outlook

India has emerged as the fastest growing major economy in the world as per the Central Statistics Organization (CSO) and International Monetary Fund (IMF). According to the Economic Survey 2015­16, the Indian economy will continue to grow more than 7 per cent in 2016-17.

The improvement in India's economic fundamentals has accelerated in the year 2015 with the combined impact of strong government reforms, RBI's inflation focus supported by benign global commodity prices.

India was ranked the highest globally in terms of consumer confidence during October-December quarter of 2015, continuing its earlier trend of being ranked the highest during first three quarters of 2015, as per the global consumer confidence index created by Nielsen.

According to IMF World Economic Outlook Update (January 2016), Indian economy is expected to grow at 7-7.75 per cent during FY 2016-17, despite the uncertainties in the global market. The Economic Survey 2015-16 had forecasted that the Indian economy will be growing by more than seven per cent for the third successive year 2016-17 and can start growing at eight per cent or more in next two years.

V. Risks and Concerns

While risk is an inherent aspect of any business, the Company being an NBFC, is primarily exposed to credit risk, liquidity risk, interest rate risk as well as operational risks. The Company has established detailed procedures and policies for underwriting across various product categories, based on the credit profile of the customers. The Company has invested in people, processes and technology to effectively mitigate risks posed by the external environment and by its borrowers. It maintains a conservative approach and manages the credit risk through prudent selection of clients, delegation of appropriate lending powers and by stipulating various prudential limits. It has in place a proper risk management team, a policy to measure the risk factors and an effective credit operations structure. The Company, while giving loan to its customers, follows the criteria and procedure laid in its Risk Management Policy.

Keep the risk one step behind

The Company has laid down a well-defined risk management mechanism covering the risk mapping & trend analysis, risk exposure, potential impact and risk mitigation process. A detailed exercise is being carried out to identify, evaluate, manage and monitoring of both business and non-business risks. The management periodically reviews the risk and suggests steps to be taken to control and mitigate the same through a properly defined framework. In line with the new regulatory requirements, the Company has formally framed a Risk Management Policy to identify and assess the key risk areas, to monitor and report compliance and effectiveness of the policy and procedure.

VI. Internal Control Systems and their adequacy

Your Company has an effective internal control and risk mitigation system, which are constantly assessed and strengthened with new / revised standard operating procedures. The internal control systems are commensurate with the nature of its business and size and complexity of its operations. The system ensures operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance with laws and regulations. Amongst other things, the internal control system of the Company also provides for reasonable assurance of recording and reporting the transactions of operations in all material aspects and of providing protection against significant misuse or loss of funds, if any.

The internal control system of the Company is supported by an internal audit process conducted by the Internal Auditor of the Company who reviews the adequacy and efficacy of the Company's internal controls, including its systems and processes and compliance with regulations and procedures.

The Audit Committee, Statutory Auditors and the Board of Directors are periodically apprised of the internal audit findings and corrective actions required / taken.

The main purposes of the Internal Control Systems are:

• assurance about the fact that the transactions are recorded in proper manner and under proper heads;

• automatic and independent checking of transactions so as to ensure their validity;

• to check and assure the compliance of various enactments like corporate laws, tax laws etc; and

• to brvent and early detection of frauds and malpractices, if any.

VIII. Human Resources / Industrial Relations

At KIFS Financial Services Limited, we ensure to provide environment for continuous innovation and improvement by rewarding the employees for the dedicated efforts made by them in achieving Company's goals. We believe whatever we achieved from where we started our journey long back is the result of efforts of our team and thus we consistently aim to provide a sustainable environment for learning right from the stage of recruitment to retention.

To accomplish the same, we have drawn up a long term strategy to nurture human potential within organization by retaining and grooming them and by attracting requisite talent from outside to focus on filling gaps across all levels of the organization.

We continuously strive to attract and retain the best talent from the local markets; clearly define their roles and responsibilities; include them into robust performance management systems; create an inspiring and rewarding work environment; engage them into an inclusive work place; impart training and create development opportunities for increasing employee knowledge and efficiency to make them future ready and to create career opportunities.

To keep abreast with changing environment and new skills, the employees are being provided regular training in their respective fields of work. Your Company believes in investing in people development and process improvements, aligned with Company's visions and values. The industrial relations with employees of the Company during the period under report remained cordial.

Further, your Company is an equal opportunity employer and is committed to ensure that the work environment is conducive to fair, safe and harmonious. It strongly believes in maintaining the dignity of all its employees, irrespective of their gender or seniority. Discrimination and harassment of any type is strictly prohibited. The number of employees employed as on March 31, 2016 were 7.

Cautionary Statement

Certain statements in this Annual Report including the Management Discussion and Analysis Report describing the Company's objectives, brdictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates, new regulations and Government policies that may impact the Company's business as well as its ability to implement the strategies. The Company does not undertake to update these statements.