DIRECTORS' REPORT

Your Directors take pleasure in presenting the 42nd Annual Report
together with the audited financial statements of the Company for
the financial year ended March 31, 2026.

Financial Highlights _{INR in crores}

" Loan portfolio on gross basis

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

The NBFC sector has remained a pivotal contributor to India's GDP
growth, supported by sustained credit traction in various asset
classes. After a year of heightened portfolio stress, especially in
microfinance and other unsecured loans, the current financial year
seems to have shown signs of improvements in disbursements and
asset quality, contributing to positive sectoral momentum.

Domestic demand remains the anchor for industry growth, fortified
by conducive financial conditions, healthy balance sheets across
banks and NBFCs and the government's continued focus on
capital expenditure. While geopolitical tensions and global market
volatility pose lingering risks, the strong fundamentals of the Indian
economy provide the resilience necessary to withstand external
shocks. Following a 25bps repo rate cut in December to stimulate
consumption, the rate remained unchanged at 5.25% as of March
31, 2026. The Monetary Policy Committee (MPC) has maintained
a 'neutral' stance, retaining the flexibility to respond judiciously to
the evolving growth-inflation outlook. The way forward will depend
on the continued stability of macroeconomic indicators and the
sustained recovery of global trade corridors.

The stress in asset quality experienced by Microfinance and
unsecured loan providers right from FY2024-25 has had a cascading
effect on secured lending operations especially for Companies
providing smaller ticket loans, where the overlap with microfinance
is a lot higher. This has caused your Company's asset quality to
show some deterioration during the current financial year. Your
Company has taken various initiatives across customer sourcing,
underwriting, collections, and risk management to ensure relatively
lesser impact on asset quality and credit costs. Despite facing one
of the most challenging years, your Company has been able to
achieve 11% portfolio growth and 2% growth in PAT. The increase in
GNPA and credit cost was also moderate and early indicators are
already showing good improvement which should augur well for a
good performance in the forthcoming financial year.

State of the Company's Affairs/Overview
Company Overview

The Company was incorporated on May 7, 1984. 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 per Reserve Bank of India
(Non-Banking Financial Companies - Registration, Exemptions
and Framework for Scale Based Regulation) Directions, 2025. The
Company operates in ten states and one union territory and is
into the business of providing secured loans for business & other
purposes.

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 remains dedicated to providing secured financial
solutions to small business owners and self-employed individuals
who typically operate outside formal credit channels. To bridge
this gap, your Company utilizes a proprietary underwriting model
that rigorously assesses borrower cash flows, supported by robust
recovery mechanisms.

The risk-based pricing model implemented by your Company
ensures that interest rates are aligned with customer profiles, credit
bureau analytics and market demand. Building on an established
presence in non-business lending - including education, emergency
and housing needs -your Company strategically entered into pure
housing loan products during FY 2026, expanding the credit
products for both the existing base and prospective customers.

The financial year was characterized by specific headwinds
stemming from the borrower overleverage crisis, that hit
microfinance and unsecured loans in FY2025, and the cascading
effect was felt by your Company in FY2026. This had an impact on
collection efficiency, asset quality and credit cost. Consequently,
your Company adopted a prudent approach, recalibrating its
growth outlook to prioritize asset quality. Enhanced collection
support and the strengthening of the legal and recovery verticals
have ensured relatively less impact, leading to 11% AUM growth and
2% PAT growth for FY2026.

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, 2026, your Company
disbursed INR 4,675.73 crores as compared to INR 4,969.66 crores
in the previous financial year. This planned year-on-year moderation
reflects a conscious decision to focus on collections and portfolio
quality amidst sectoral stress. Your Company is fundamentally
a collections-first Company, which reflected in a pullback of
disbursements during FY2026. Your Company is also confident
that, with improvement being witnessed in collections and asset

quality, we would be able to accelerate on disbursements and
portfolio growth during the forthcoming 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, 2026, your Company expanded its branch network
to 844 branches, up from 748 branches in the previous year. During
the year, the Company also closed/merged 3 branches.

Your Company's branch expansion approach works with twin objectives -

• Firstly, your Company adopted the “Split branch” strategy to
ensure prudent risk management which ensures that branches
that cross a certain size are split into multiple branches with a
view to maintaining an optimal AUM / number of accounts per
branch and also be close to the customer which also augurs well
from the perspectives of customer service and risk management.
Under this approach, a set of accounts are transferred from the
existing to the new branch thereby ensuring that the new branch
does not start from scratch and there is also space that is made
available to the existing branches to enhance their AUM. Typically,
a branch takes anywhere between 6-9 months to breakeven /
start contributing to the P&L. If viewed against this background,
about 95% of the branches opened between July 2024 and June
2025 i.e. branches that had crossed a vintage of 6 months as of
March 2026 are profitable, not just on a standalone basis but even
after allocation of common overheads.

• Secondly, your Company also put in fresh branches in newer
areas both in entrenched and growing geographies keeping
growth prospects in mind. By penetrating into newer areas, the
business potential automatically gets enhanced.

To support future growth, your Company has strengthened its
workforce in addition to enhancement of the branch network,
ensuring a well-equipped team to meet rising demand.

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, 2026, along with a
comparative analysis of the previous financial year, are provided below:

Financial Metrics

As on March 31, 2026, Assets Under Management (AUM) stood at
INR 13,224.65 Crores, reflecting a growth of 11 %. Your Company
continues to maintain a robust capital position, with a Net Worth

of INR 7,380.15 Crores. Profit After Tax (PAT) improved on a year-on-
year basis and the Company remains focused on optimising the
cost-to-income ratio, which stood at 41.82%. The average ticket size
of loans has trended higher, increasing from INR 3.58 Lakhs to 3.93
Lakhs.

Asset Quality

Since inception, asset quality and collection efficiency have been
the primary pillars of our growth strategy. This year, the industry¬
wide effects of overleveraging and the cascading impact on
secured loans presented certain challenges to asset quality. To
ensure minimal impact from this stress, your Company resorted
to certain actions which have kept the impact relatively low. These
actions have also been resulting in gradual improvement, and we
are confident of continuing to see improvement in portfolio quality
in the coming financial year. For the period ended March 31, 2026,
your Company reported Gross Stage 3 Assets and Net Stage 3
Assets of 3.37% and 2.00% respectively, as compared to previous
year's levels of 1.79% and 0.88%. While there has been an increase in
GNPA and NNPA, the impact would seem fairly moderate especially
if viewed in the context of the challenges that were faced by your
Company during the current financial year.

Prospects

The Indian credit market continues to offer substantial growth
prospects, particularly within the segment of micro-entrepreneurs
and self-employed individuals who remain underserved by
formal financial institutions. The Company observes increasing
competition in the small to medium ticket property loans segment
as more players recognise its inherent potential. To navigate this
competitive landscape and mitigate market risks, your Company is
continuously identifying innovative solutions and diversified product
profiles to cater to evolving borrower needs. Management remains
dedicated to executing strategic initiatives that sustain growth
momentum and profitability, thereby reinforcing stakeholders'
confidence and long-term value creation.

Resource Mobilization

Your Company maintains a resilient and well-diversified borrowing
profile, leveraging multiple sources including capital markets,
domestic and international financial institutions and banks.

At the shareholders' meeting held on September 9, 2025, 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 reserves
and securities premium, up to INR 12,000 Crores.

As of March 31, 2026, your Company's total outstanding borrowings
stood at INR 8,200.43 crores.

Your Company continues to adhere to a prudent Asset-Liability
Management (ALM) strategy, to optimise funding costs while
maintaining a comfortable liquidity cushion.

New lenders and developments during the Financial Year 2025-26:
Total Borrowings and Term loan composition: During the financial
year, your Company raised fresh borrowings aggregating to
INR 2,906.33 Crores, including fresh term loans from banks and
financial institutions amounting to INR 1,810 Crores. As of March 31,
2026, total outstanding borrowings stood at INR 8,200.43 Crores,

with the weighted average tenure of fresh loans raised during the
year of 63 months.

During the year, your Company further strengthened its
liability profile by onboarding new lenders including the Asian
Development Bank and Kookmin Bank, ensuring a stable foundation
for forthcoming growth. Also of equal if not more importance has
been the reduction in cost of incremental debt that was achieved
by your Company during the current financial. As against a cost of
incremental debt of 9.46% for the incremental borrowings raised
in FY2024-25, the incremental borrowings for the current financial
were onboarded at an all-inclusive pricing of 8.50%, a drop of 96
bps.

Securitization: Your Company actively utilised the Securitization
(PTC) market to enhance liquidity and mitigate asset-liability
mismatches.

During the year, your Company securitized receivables worth INR
748.12 Crores, realizing a sale consideration of INR 643.00 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 has not issued any fresh debentures
during financial year 2026.

Commercial Paper (CP)

Your Company did not issue any Commercial Papers or other short¬
term instruments during the financial year ended March 31, 2026.

The borrowing mix as on March 31, 2026 stood as follows:

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 2025-26.

Credit Rating

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

As of March 31, 2026, 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, 2026.

Dividend

The Board of Directors at its meeting held on April 28, 2026 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 5.4%) for the financial year ended March 31, 2026 to
the shareholders of the Company for approval at the ensuing 42nd
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/wp-content/uploads/2026/05/Dividend-
Distribution-Policy-April-28-2026.pdf

Transfer to Reserves

In compliance with the requirements under the Reserve Bank of
India Act, 1934, your Company has transferred a sum of INR 219.75
Crores to the statutory reserves during the financial year ended
March 31, 2026.

Deposits

Your Company operates as a non-deposit taking entity and has not
accepted any public deposits during the financial year ended March
31, 2026, in accordance with applicable regulatory requirements.

Capital Adequacy Ratio

As of March 31, 2026, your Company's Capital Adequacy Ratio
stood at 51.89%, significantly exceeding the regulatory threshold
of 15% mandated by the Reserve Bank of India (RBI).

Your Company's Internal Capital Adequacy and Assessment
Process (ICAAP) confirms that the Company remains well
capitalized to support its business objectives and risk profile.

Share Capital
Authorised Capital

During the year under review, there was no change in the
Authorised Share 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, 2026, 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
4,38,178 fully paid-up equity shares under various ASOP schemes.
15,918 fully paid -up equity shares under Five-Star Associate Stock
Option Scheme 2015 and 4,22,260 fully paid -up equity shares
under Five-Star Associate Stock Option Scheme 2018 were allotted
during the financial year under review.

During the financial year under review, 3,10,000 share warrants
were converted into 3,10,000 fully paid-up equity shares upon
exercise of conversion rights by Mr. Lakshmipathy Deenadayalan,
Chairman & Managing Director, and Mr. Srikanth Gopalakrishnan,
Joint Managing Director & CFO, in accordance with the terms of
issue. The equity shares so allotted rank pari passu with the existing
equity shares of the Company.

The issued, paid up and subscribed capital as on March 31, 2026
stood at INR 29,51,75,278 consisting of 29,51,75,278 equity shares
having a face value of INR 1.00 each.

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/wp-content/uploads/2026/05/Related-
Party-Transactions-Policy-April-28-2026.pdf

In alignment with the Company's Policy on Related Party
Transactions, during the year under review, 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 posed a potential conflict 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 transactions received prior approval from the Audit Committee
and were subject to subsequent quarterly reviews to ensure
continued adherence to the policy.

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, 2026.

A certificate from secretarial auditor M/s Sandeep & Associates,
Practicing Company Secretaries confirming the implementation of
ASOP schemes in accordance with SEBI (SBEB) Regulations and
shareholders resolutions, will be placed before the shareholders at
the Annual General Meeting, and 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
https://fivestargroup.in/wp-content/uploads/2026/05/ESOP-
Disclosure-2026.pdf

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/annual-reports-returns/

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, 2026, and the date of this report.

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

While the Company's operations as a financial institution do not
involve manufacturing or high-energy consumption, your Company
remains committed to resource conservation and environmental
responsibility. Your Company continually leverages technology to
digitize the workflows, thereby reducing carbon footprint. During
the financial year, the Company incurred a foreign currency
expenditure of INR 14.40 Crores primarily relating to IT Licensing
fees and interest outflow on account of external commercial
borrowings availed by the Company. There are no foreign exchange
earnings during the financial year.

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, 2026.

The Company has not entered into any one-time settlement
with its lenders during the financial year ended March 31, 2026,
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.
The MDA also contains details of the Company's risk management
framework, including the development and implementation of risk
management policy and the key risks faced by the Company.

Key Risk Mitigation Measures
Credit Risk Management:

• A multi-layered 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 loan-to-value (LTV)
ratios and a conservative debt service capacity analysis to ensure
borrower creditworthiness.

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

• Loans are provided to the household as against to an individual,
which ensures collective decision making and avoid potential
conflicts which may lead to asset quality issues.

• Your Company resorts to the registered mortgage on the security
rather than an equitable mortgage. This helps evidence your
Company's charge on the property and avoids multiple charges
on the same property.

Risk Oversight & Governance:

The Company has strong multi layered risk oversight and
governance

1. Risk Management Committee

The Risk Management Committee (RMC) ensures continuous
monitoring of credit risk, portfolio performance and operational
risks, providing strategic direction to mitigate potential threats. Risk
Management Committee is Chaired by Mr. TT Srinivasaraghavan,
Independent Director.

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

2. Audit Committee

The Audit Committee being the most important constituent of
“those charged with Governance (TCWG)” meticulously reviews
the financial reporting and also ensures that necessary internal
controls are in place to ensure proper accounting of transactions.
The Chairperson of the Audit Committee engages with the
Statutory Auditors, Internal Auditors (both EIA and IIA) to discuss key
aspects of the financials thus bringing a clear focus and oversight
over financial reporting and updates the Board on the same. While
the entire Board qualifies as “those charged with governance”, the
Audit Committee is responsible for reviewing and recommending
the financial results to the Board for its approval and hence the
Board has authorised the Audit Committee to engage in a two¬
way communication with Auditors on any information relevant
to the audit to fulfil the responsibility for oversight of the financial
reporting. The Audit Committee is chaired by Mr. Anand Raghavan,
Independent Director

3. IT Strategy Committee

The IT Strategy Committee is a key pillar of the Company's
governance framework, providing strategic oversight of technology
to support business growth, operational resilience, risk management,
and regulatory compliance. The Committee periodically reviews the
IT strategy and roadmap, IT governance, technology investments,
key IT projects, cybersecurity and information security, business
continuity and disaster recovery, IT operations and infrastructure,
emerging technologies including Artificial Intelligence, technology
architecture, IT policies, and the implementation of applicable RBI
Information Technology Directions. The Committee is chaired by
Mr. Ramkumar Ramamoorthy, Independent Director.

4. Other Pillars of Governance

The other pillars of governance includes various sub-committees of
the Board including the Nomination and Remuneration Committee,
Stakeholders Relationship Committee, functional departments
like Finance, Internal Audit, Compliance, Risk Management and
Customer Grievance departments as these play a pivotal role in
strengthening the governance framework. Each of these pillars
provides a periodic update to the Board on progress in respective
areas like employee compensation and welfare, risk management,
shareholder grievances, financial reporting, policy compliance,
timely adherence to customer grievances and customer
satisfaction and compliance with applicable laws etc.

Market & Liquidity Risk Management

The Asset Liability Committee (ALCO) actively manages liquidity
risk and interest rate exposures to maintain financial stability.

A well-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

The employees of the Company are the cornerstone of your
Company's success. As of March 31, 2026, your Company had a

strength of 14,159 dedicated employees. Your Company remains
committed to attracting and retaining top talent through competitive
compensation, structured career progression and a culture of
continuous learning. Detailed analysis of Human Resources including
various sub-functions carried out by the department is discussed
under Management Discussion and Analysis.

During the year under review, your Company had launched an
Employee Learning Platform to provide specialized training
across various functional areas, including but not limited to risk
assessment, regulatory compliance and leadership ensuring the
team is well-equipped to drive the Company's growth trajectory.

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 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 5
(five) Independent Directors (two of whom are woman), [1 (one)]
Non-Executive Director, and 2 (two) Executive Directors (Chairman
& Managing Director and Joint Managing Director & CFO), as of
March 31, 2026. Details on the Board composition are provided
below:

Detailed profile of the Directors and their Directorships in other
Companies is hosted on the website of the Company.

Changes in the Composition of Board during the Financial Year

The following changes took place in the composition of the Board
of Directors during the Financial Year 2025-26 under review:

New Appointments

During the year under review, based on the recommendation
of the Nomination and Remuneration Committee, the Board of
Directors at its meeting held on January 28, 2026 approved the
appointment of Ms. Rajeshwari Shankar (DIN:01573029) as an
Additional Director, designated as a Non-Executive Independent
Director, for a term of five consecutive years from February 2, 2026
to February 1, 2031 (both days inclusive), and the re-appointment
of Mr. Srinivasaraghavan Thiruvallur Thattai (DIN: 00018247) as
a Non-Executive Independent Director for a second term of five
consecutive years from August 25, 2026 to August 24, 2031 (both
days inclusive), subject to the approval of the Members.

The aforesaid approvals were subsequently obtained from the
Members by way of special resolutions passed through postal
ballot on March 21, 2026, pursuant to which Ms. Rajeshwari Shankar
was regularised as a Non-Executive Independent Director of the
Company and Mr. Srinivasaraghavan Thiruvallur Thattai was re¬
appointed for a second term as a Non-Executive Independent
Director. The special resolution for re-appointment has been
obtained in compliance with Section 149(10) of the Companies
Act 2013 and Regulation 17(1A) and Regulation 25 of SEBI LODR
Regulations

Resignations

During the financial year under review, Mr. Rangarajan Krishnan
(DIN: 07289972), who served as the Joint Managing Director and
Chief Executive Officer, tendered his resignation from his position
w.e.f August 14, 2025.

Changes in the Board after the Financial Year:

Ms. Bhama Krishnamurthy (DIN: 02196839) has completed her
second term of five consecutive years as an Independent Director
and ceased to be an Independent Director of the Company with
effect from the close of business hours on April 11, 2026

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 42nd 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, Mr. Rangarajan Krishnan, Joint
Managing Director and Chief Executive Officer (DIN: 07289972),
resigned from the services of the Company. As in the past financial
years, Mr. Lakshmipathy Deenadayalan, Managing Director, continues
to spearhead the business and operations of the Company.

Pursuant to the provisions of Section 203 of the Companies Act,
2013 read with the rules made thereunder, the following are the
Whole-time Key Managerial Personnel of the Company as on
March 31, 2026:

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

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

c) Mr. Vigneshkumar S M, Company Secretary and Compliance
Officer.

There have been no changes in the Key Managerial Personnel of
the Company between the end of the financial year 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/wp-content/uploads/2026/05/
Appointment-Remuneration-Evaluation-Policy-April-28-2026-1.pdf

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 performance
evaluation was carried out through Independent external agency

as per the criteria laid and the same is reviewed by the Nomination
and Remuneration Committee 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 & Auditor's report
Statutory Auditors

In compliance with the Reserve Bank of India's Guidelines on
appointment of Statutory Auditors for Non-Banking Financial
Companies vide Circular RBI/2021 -22/25 Ref. No. DoS.CD.ARG/
SEC.01/08.91.001/2021-22 dated April 27, 2021, and pursuant to the
provisions of Section 139 of the Companies Act, 2013 read with the
Companies (Audit and Auditors) Rules, 2014, the Members at the
Annual General Meeting held on September 13, 2024 approved the
appointment of M/s Deloitte Haskins & Sells, Chartered Accountants
(Firm Registration No. 008072S), as the Statutory Auditors of the
Company for a term of three consecutive financial years, i.e., from
FY 2024-25 to FY 2026-27, to hold office from the conclusion of the
40th Annual General Meeting till the conclusion of the 43rd Annual
General Meeting.

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, 2026 under
Section 143(12) of the Companies Act, 2013.

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 internal audit 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,
have been appointed to conduct the secretarial audit of the
Company for the financial years from FY 2025-26 to FY 2029-30, in
accordance with the provisions of Section 204 of the Companies
Act, 2013, the rules made thereunder, and Regulation 24A of the
SEBI (LODR) Regulations, 2015.

The Secretarial Audit Report for the financial year ended March 31,
2026, is annexed herewith as Annexure A and does not contain any
qualifications, reservations, or adverse remarks.

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 is central to our business strategy, driving effectiveness,
efficiency and innovation across the entire loan lifecycle-from
underwriting to collections. 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 uses a robust Loan
Origination System that integrates with banks, bureaus, account
aggregators, and data providers to streamline loan processing. This
is complemented by a secure API ecosystem wherein multiple,
high-security API integrations have been made that automate the
capture of high-fidelity data across all touchpoints. All these reside
on a resilient, secure, and highly scalable cloud infrastructure that
has been designed for 24/7 availability.

The entire journey from lead login to disbursement is fully digitized
eliminating manual friction. Real-time connectivity with Credit
Bureaus, Account Aggregators, Banks, and third-party data
providers facilitate instant verification.

Your Company has made significant progress leveraging data
and analytics, and a data lake that powers advanced machine
learning (ML) models to deliver precise predictive behaviour and
risk scoring has been developed by your Company. Your Company

has also developed proprietary ML models tailored for Credit Risk
Scoring to augment the underwriting process. On the collections
front, partner assisted models for Bounce Prediction Analytics have
been developed to leverage technology for automated collections
and support field collection officers to improve efficiency and
productivity.

With AI becoming the new business enabler / disruptor, your
Company has also been making strong progress on the AI front
by reviewing the architecture, governance, risk and accountability
parameters. Your Company has taken a number of initiatives,
including the following:

• Intelligent Document Processing through GenAI-driven
extraction to automate data capture and improve data quality
and accuracy.

• GenAI-enabled bots have been deployed in local languages for
automated collections

• Your Company is also working with specialized product platforms
to convert voice conversations with customers and field staff, in
local languages, into actionable data.

On IT infrastructure, the IT Strategy Committee oversees IT
governance, cybersecurity and business continuity to ensure a
secure and scalable technological environment. Your Company
has also employed a Security Operations Centre providing 24X7
surveillance across the entire digital perimeter. This includes
continuous monitoring of cloud environments to prevent
unauthorized access or misconfigurations, real-time threat
detection and mitigation at the network and application layers to
safeguard against zero-day vulnerabilities. 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 reviews the 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.

The company engaged a Big 4 audit firm to conduct a
comprehensive DPDPA Gap Assessment evaluating our
organizational readiness and baseline data processing workflows,
which was completed in December 2025. Following this, a
prioritized Compliance Plan was formulated outlining the roadmap
to achieve full compliance as a Data Fiduciary. Initial compliance
plan activities including drafting foundational policies, updating
Data Processing Addendums (DPAs) for third-party vendors,
executing cross-functional data inventory exercises, and mapping
data collection touchpoints for the Record of Processing Activities
(ROPA) have all been completed.

Technical architecture standardization for the DPDPA platform is
complete, and solutioning is in progress. The formal appointment
of the Data Protection Officer (DPO) will follow in the next phase.
All remaining milestones are planned for completion before the
mandated May 2027 timeline.

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/wp-content/uploads/2026/05/Corporate-
Social-Responsibility-Policy.pdf

As per aforesaid provisions of the Companies Act, 2013, your
Company was required to spend INR 22.34 crores towards CSR
initiatives, representing 2% of the average net profits of the Company
from the past three financial years. Your Company contributed INR
17.90 crores towards Corporate Social Responsibility (CSR) during
the financial year ended March 31, 2026. Balance amount of INR
4.44 crores have been transferred to unspent corporate social
responsibility account towards ongoing projects for the financial
year 2025-26. Details of the various CSR programme/projects
approved during financial year 2025-26 is available on the website
of the Company in Corporate Social Responsibility section.

Pursuant to Section 135 of the Companies Act 2013, the Company
has engaged M/s Chrysalis Services Private Limited to conduct
an Impact Assessment on applicable CSR projects. The impact
assessment report is displayed on the website of the Company in
Corporate Social Responsibility section.

The Annual Report on CSR activities for the financial year ended
March 31, 2026, 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/wp-content/uploads/2026/05/
Appointment-Remuneration-Evaluation-Policy-April-28-2026-1.pdf

Whistle Blower Policy & 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/storage/2026/05/Whistle-Blower-Policy-
Vigil-Mechanism-April-28-2026.pdf

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, 2026

Board & its Committees

During the financial year ended March 31, 2026, 6 (Six) Board
Meetings were held on April 29, 2025, July 28, 2025, September
20, 2025, October 29, 2025, January 28, 2026, and March 17, 2026,
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 Managing Director 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.

The reasonable assurance certificate on BRSR core is applicable for
the financial year 2026. Accordingly, the certificate issued by M/s
SGS India Private Ltd, reasonable assurance provider forms part of
the Business Responsibility and sustainability report.

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/wp-content/uploads/2026/05/Policy-on-
Prevention-of-Sexual-Harassment-April-28-2026.pdf

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, 2026.

Compliance affirmation on Maternity Benefit Act:

The Company is in full compliance with the Maternity Benefit Act,
1961 and is currently establishing creche facilities at the corporate
office.

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: All 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, 2026.

For and on behalf of the board of Directors
Lakshmipathy Deenadayalan

Place: Chennai Chairman & Managing Director

Date: April 28, 2026 DIN: 01723269