EARNINGS UPDATE Q3FY18

Transcription

1 EARNINGS UPDATE Q3FY18 JANUARY 2018 BHARAT FINANCIAL INCLUSION LIMITED (Formerly known as SKS Microfinance Limited ) BSE: NSE: BHARATFIN Corporate Identity No. L65999MH2003PLC This presentation is solely for viewing. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval from BHARAT Financial Inclusion Limited.

2 CONTENTS Particulars Slide No. Update on Merger 3 Executive Summary 7 Investment Hypothesis 9 Company Overview 12 Clarity on Major Uncertainties Post AP MFI Crisis 17 Growth Anatomy 22 Future Strategy 28 Pilot on Retail Distribution And Service Points (RDSP) 32 Update on Cashless and E-KYC 36 Loans for Housing Improvement & Two-Wheeler (Pilot) 39 Q3FY18 Performance Highlights 43 Industry Update On Credit Quality 51 Update on Demonetisation 53 Review of Financials 55 Financial Architecture 67 Risk Management 72 Capital Structure 74 Annexures 77 Figures rounded off to the nearest digit across the presentation. Figures and ratios have been regrouped wherever necessary. 2

3 UPDATE ON MERGER 3 3

4 RATIONALE FOR MERGER FOR BFIL Access to savings & deposits products Enhanced relationship with customers Competitive edge with significant head start vis-a-vis SFBs Reduced impact of Political Risk Propensity to default by customers reduces in case of political events. e.g. In the 5 pilot branches, customers with RD(Recurring deposit) had lower overdues (>4 weeks at 0.08%*) vis-a-vis non-rd customers ( >4 weeks at 4.3%*) Create a robust Secured lending platform Banks expertise in 2-wheeler financing coupled with extensive distribution network of BFIL creates a significant opportunity Similarly, home improvement loans can be scaled up Cashless collections > Customer analytics > Consumer finance loan Retail Distribution Service Point Rollout (RDSP) Cashless collections > Time saved in center meeting > Improved Sangam manager productivity > Improved cost to Income ratio Cross-sell opportunity to Non-MFI customers Ex: Solar, Mobile, Sewing machines, etc. * As on 30 th Sep

5 TRANSACTION STRUCTURE 1. BFIL to merge into IBL under a Scheme of Arrangement Issue of shares by IBL to shareholders of BFIL 2 BFIL Shareholders 2. BFIL shareholders to receive IBL shares as consideration 3. IBL to transfer the employees and operations into a wholly owned subsidiary* making it a captive Business Correspondent Indusind Bank Ltd. Merger of BFIL into IBL 1 3 Subsidarisation of BC Operations BFIL * Subsidiary to be incorporated post RBI approval Wholly Owned Subsidiary 5

6 STATUS ON MERGER - CCI APPROVAL RECEIVED Date of Announcement 14 th Oct months 4-6 months 1 month Board Approval Regulatory Filings & Approvals NCLT Filings & Approval ROC Filings & Share Issuance Valuation / Swap Ratio Approval of Scheme, matters therein and other legal documents RBI CCI SEBI and Stock Exchanges (NOC) Filing of Scheme NCLT approval: Shareholders approval, Creditors approval, other approvals ROC Filing Allotment of shares to BFIL shareholders Transaction to take up to 6-9 months for closure 6

7 EXECUTIVE SUMMARY 7

8 EXECUTIVE SUMMARY Overview AUM Growth (Non-AP portfolio) Growing Net Interest Income Largest microfinance company in India with gross loan portfolio of INR 11,466 Cr., 66 Lakhs members in Non-AP states and 1,513 branches Lowest lending rate (19.75%) among NBFC-MFIs Company s non-ap Portfolio grew by 34% (YoY) to INR 11,466 Crs. as of Dec 31, 2017 Profit after tax for Q3FY18 of INR 163 Crs 4,171 2,016 2,837 7,677 9,150 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 8,531 11,466 Dec-16 Dec FY13 FY14 FY15 FY16 FY17 Q3FY17 Q3FY18 Financial Metrics Balanced Geographical mix Diversified Shareholding Strong Balance sheet and liquidity Net worth (INR Cr.) 2,757 Capital Adequacy 31.0% Cash & Cash equivalent (INR Cr.) Efficiency and Profitability 1,156 Marginal cost of borrowing # 8.4% Cost to income 53.1% Return on Asset^* 4.9% Return on Equity* 24.5% Note: Above Data for Q3FY18 Non-AP = excluding states of AP and Telangana # includes on and off b/s borrowings (excluding processing fees) for Q3FY18 ^Assets includes securitized, assigned and managed loans *Including MAT credit Kerala 6% Madhya Pradesh 4% Jharkhand 4% Rajasthan 5% Uttar Pradesh 7% Maharashtra 11% Others 6% Karnataka 12% Note: Portfolio as of Dec 31, 2017 Odisha 17% Bihar 15% INR Cr. West Bengal 12% Note: Shareholding as of Dec 31, 2017 INR Cr. NII = Interest income on Portfolio loans + Excess interest spread on securitization/income from Assignment + BC Fee Financial Cost Morgan Stanley Mauritius Birla Sun Life Mutual Fund Amansa Capital PTE Limited Top 10 Shareholders Reliance Mutual Fund Route One Matthews Wellington East Bridge Capital Alliancebernstein Tree Line 3.7% 3.4% 3.3% 3.2% 3.2% 2.9% 2.8% 4.0% 3.8% 6.1% Figures rounded off to the nearest digit across the presentation 8

9 INVESTMENT HYPOTHESIS 9 9

10 INVESTMENT HYPOTHESIS Favorable Macros There is a huge demand/ supply gap for microfinance Entry barriers and supervisory standards are significantly enhanced thwarting future competition No credible alternative for microfinance emerges even after 7.3 years of AP MFI Act Regulatory Clarity RBI s comprehensive regulatory framework mitigates political and regulatory risks RBI and MoF acknowledge microfinance as a key component of financial inclusion PSL requirement of banks to enhance funding availability and value of the franchise Unmatched leadership BFIL is the most efficient and lowest cost lender among NBFC-MFIs Impeccable track record of meeting financial obligations in a timely manner even during the black swan event of AP-MFI Crisis Diversified earnings stream with cross-sell / Non-Loan revenue contributing 10.5% to PAT for 9MFY18 Pan-India presence with no unbalanced geographic sectoral exposure Strong solvency (Capital Adequacy of 31.0% as on 31 st Dec 2017) and sufficient liquidity Steady state RoA of 4% is the highest among financial services play 10

11 THERE IS A HUGE UNMET DEMAND FOR MICROFINANCE INR crore Micro-Credit Demand In India covered in part by moneylenders and informal sources, but largely untapped Rs. 5,40,000 Year 2015 Segment mn households in India with some assets (INR 90/day PPP) MFIs SHG Rs. 2,40,000 Year 2005 Rs. 62,575 24,017 38,558 Rs. 1,09,631 Rs.87,442 37,286 27,582 59,860 72,345 Rs. 91,228 38,781 52,447 * * FY14 FY15 FY16 FY17 * * Demand Segment -2 (BPL) 80 mn households in India with no assets (INR 55/day PPP) *Disbursement in INR Crs. Assumptions Target households: 150 mn Basis: World Bank poverty statistics, India Avg. credit requirement: per household Rs. 45,000 (2015), adjusted with inflation on per household Rs 20,000 (Year 2005) Basis: EDA Rural Systems, World Bank, Access to Finance Adjustment for service difficulties: 20% Basis: adjustment made to reflect inaccessible poor in rural areas (~7%) and half of underserved urban poor (0.5 x 26% = 13%) Source: World Bank; Sa-Dhan Bharat Microfinance reports 11

12 COMPANY OVERVIEW 12 12

13 BFIL USES GRAMEEN MODEL TO PROVIDE UNSECURED CREDIT AT THE DOORSTEP OF LOW INCOME RURAL WOMEN Put loan officers pic Survey a village Recruit members Deliver doorstep service Provide training 13

14 BUILDING BLOCKS OF TURNAROUND POST AP MFI CRISIS INR crore Balance Sheet Cleansed Supply-side Shock Managed Credit Growth Resumed AP exposure of Rs. 1,360 crore written off Drawdowns 2,875 3,503 3,526 Non AP Gross Loan Portfolio 2,837 1,484 1,185 FY 12 FY 13 FY 14 Q3FY11 Q3FY12 Q4FY14 Cost Structure Optimization Return To Profitability Q3FY11 Q4FY14 Var. Branches 2,403 1,255-48% 70 Other Opex (INR crore) % Headcount 25,735 8,932-65% Personnel Cost (INR crore) % FY12 FY13 FY14 (13.6) Bn (3.0) Bn 14

15 DURABLE FOUNDATION FOR SUSTAINABLE GROWTH (1/2) Market Share Regained Non-AP Portfolio Outstanding 28,300 14% 3,945 14,600 66,549 INR Crs. BFIL Disbursement share 23% in Q2FY18 (Industry total disbursement for Q2FY18 is Rs. 18,972* Crs.) 10,597 16% * Capital Reinforced Net worth - Rs. 2,757 crs CAR % (RBI Requirement 15%) 1,229 Others BFIL Oct 10 June 12 Sep 17 Sep 17 Includes BC Portfolio managed by NBFC-MFIs & gross loan portfolio of SFBs (source: MFIN) 8% Technology Upgraded Efficiency Gains Yrs Installed Computers at all branches with In-House lending system All branch connectivity with daily data receipt (1,215 remote locations) Equipped Loan Officers with Refactoring of tablets In-house lending system Instant Credit Bureau check, E-KYC and cashless Disbursements done Retail Distribution & Service Points & Cashless Collections 74.5% Cost to Income 61.1% 48.3% 50.0% 51.2% FY14 FY15 FY16 FY17 9MFY18 Marginal Cost of Borrowing # 12.6% 11.9% 10.2% 9.4% 8.8% FY14 FY15 FY16 FY17 9MFY18 # On and Off balance sheet borrowings (excl. Managed Loans) including processing fees

16 DURABLE FOUNDATION FOR SUSTAINABLE GROWTH (2/2) Political Risk Mitigation through interest rate reduction 29.25% 4.8% reduction since Oct % 23.55% 22.00% 20.75% 19.75% Oct-10 Jan-11 Oct-14 Jul-15 Oct-15 Dec-15 Interest rate on income generation loans Reduced Borrowing Dependence Lower State Concentration Share of borrowing from top 5 banks 74% Top three states share in GLP 53% 35% 44% Mar-13 Dec-17 Sep-10 Dec-17 Term loan and cash credit facilities GLP: Gross Loan Portfolio 16

17 CLARITY ON MAJOR UNCERTAINTIES POST AP MFI CRISIS 17

18 WHAT DOESN T KILL YOU, MAKES YOU STRONGER - POSITIVE DEVELOPMENTS POST AP MFI CRISIS Concerns Clarity Will there be multiple regulators? Regulatory clarity RBI to be the sole regulator Funding uncertainty? Priority sector status continues MFIs are the only indirect priority sector dispensation Will there be contagion? No contagion Since past 7.3 years no other state has followed suit Has the operating model been challenged? What will be the economics under regulated interest rate regime? Collection efficiency maintained despite disbursements being a fraction of collections during the wind-down mode i.e. Oct 2010 to June No alternative credit delivery model has gained currency. RoA of 3-4% on a steady-state basis 18

19 OPERATING MODEL VAILIDITY ESTABLISHED Non-AP Loan Portfolio Collection efficiency of 97% during wind-down mode dispels ever greening myth 3,942 3,526 INR crs 2,706 2,101 1,635 1,185 1,320 1,229 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY million borrowers repaid loans without incremental lending Internal generation -- and not incremental debt -- aids prompt repayment No. of non-ap borrowers who repaid on-time during this period No. of non-ap members who availed loans during this period No. of non-ap members who didn t receive any incremental credit from BFIL during this period in Millions MFI Industry non- AP Portfolio Outstanding (Rs Cr) Oct 10 28,300 June 12 14,600 19

20 COMPETITIVE LANDSCAPE CHANGES TO BFILS ADVANTAGE INR crore Snapshot of Equifax Credit Bureau*: Institutional Infrastructure Credit Bureaus- - Equifax & Highmark are functional - 95% of MFIs now use CB reports for disbursements No. of loan records Crore No. of borrower records 9.2 Crore No. of loan records (live) 6.3 Crore^ No. of borrower records (live) 3.7 Crore^ No. of MFIs reporting 167 Market Share Dynamics 3 rd, 4 th and 5 th largest MFI players with 33% Non-AP market share went under CDR. Sector outstanding Non-AP Portfolio Oct 10 28,300 Mar 14 24,615 Mar 15-40,138 Mar 16-50,534 Mar 17-61,623 Jun 17-63,082 Sep 17-66,549 # * Source: Equifax (as on Nov 17), Excluding A.P and Telangana # as per MFIN; Sep 17 - GLP including BC portfolio managed by NBFC-MFIs and gross loan portfolio of SFBs ^ DPD. 20

21 STEADY-STATE ROA OF 4% CAN BE TARGETED Interest rate Processing fee Minimum Alternate 21% 21.6 Marginal Cost of borrowings: 8.5%. Portfolio funded by debt: 80% * # Financial cost Operating cost Prov. & Write-off Taxes Profit Revenue *interest rate charged is 19.75% for new loans effective from 7 th Dec 15 #Processing fee is calculated based on weighted average portfolio mix of 64% IGL (1 Yr. loan), 14% LTL (2 Yr. loan) and 22% MTL (1.5 Yr. loan) 21

22 GROWTH ANATOMY 22

23 7 YEAR CAGR FOR THE SECTOR AND BFIL ARE 13% AND 15% RESPECTIVELY Industry GLP BFIL GLP 66,549 ^ 61,623 ^ 60,344 ^ 9,150 9,046 10,597 50,535 7,677 38,386 28,300 14,600 16,740 24,499 3,942 4,171 2,837 2,016 1,185 1,320 Oct'10 Jun'12 Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Sep'16 Sep'17 Sep'10 Dec'11 Mar'12 Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Sep'16 Sep'17 ^Industry portfolio includes NBFC-MFIs and SFBs only Source: MFIN Micrometer (Mar 13,Mar 14, Mar 15, Mar 16,Mar 17, Sep 16, Sep 17 data) 23

24 INDUSTRY GROWTH SKEWED TOWARDS URBAN, WHEREAS WE REMAIN RURAL FOCUSED Urban Rural MFI Industry- Mar'13^ 33% 67% Industry growth skewed towards urban MFI Industry - Mar'17* 57% 43% We are rural focused BFIL- Dec'17 19% 81% 0% 20% 40% 60% 80% 100% Source: ^Sa-Dhan Report 2013,*MFIN Micrometer 24

25 AUM GROWTH IS PRIMARILY LED BY CUSTOMER ACQUISITION OVER THE LAST DECADE 150% 124% CAGR % 44% 41% 13% 2% 18% 22% 25% 13% FY 07-10* FY 10-13^ FY 13 - Q3FY18^ FY 07- Q3FY18* -13% -15% Gross loan portfolio Active Borrowers Gross loan portfolio/ Active Borrowers *Enterprise figures ^ Excluding states of A.P and Telangana 25

26 CREDIT BUREAU DATA Rejection rate for All Products Rejection rate for Long Term loans 15% 23% 25% 26% 28% 19% * 29% 38% 37% 41% 35% 32% * FY-15 FY-16 FY-17 Q3- FY17 Q2- FY18 Q3- FY18 FY-15 FY-16 FY-17 Q3- FY17 Q2- FY18 Q3- FY18 87% 83% Hit rate^ for all products 90% 87% 95% 90% * FY-15 FY-16 FY-17 Q3- FY17 Q2- FY18 Q3- FY18 *Note: Rejections are done based on data input from Credit bureau. Rejection data for Q3FY18 is calculated based on unique clients basis. Corresponding rejection rate for Q2FY18 for all products and LTL is 20% and 29% and for Q3FY17 for all products and LTL is 19% and 31% respectively. Similarly the hit rate for Q2FY18 is 92% and for Q3FY18 is 88% ^ Hit rate = % of loan applications with matching record in credit bureau Rejection Reasons Q3FY18 % Mix Reasons All Products LTL Loans from=>2mfis 49% 50% =>2MFIs and Outstanding Balance >60K 20% 21% =>2MFIs and Default History 11% 11% Outstanding Balance>60K 7% 6% Eligibility< Min Ticket Size 5% 7% =>2MFIs,Outstanding Balance>60K and Default History 4% 4% Default History 3% 1% Default History and Outstanding Balance >60K 0.5% 0.3% Total 100% 100% Major Initiatives Impacting Credit Bureau Decision: 99.9% of credit enquiry with Aadhaar as primary KYC (Dec 17) Internal CAP of Rs. 60,000 for total indebtness of the borrower for JLG loans, including loans from other MFIs. 26

27 BFIL HAS NIL EXPOSURE IN SHG CONCENTRATED STATES SHG Concentrated States SHG Exposure <=5% State SHG Exposure* BFIL Exposure* Andhra Pradesh 28% - Telangana 20% - Karnataka 13% 12% Tamil Nadu 10% - West Bengal 8% 12% Kerala 5% 6% Odisha 3% 17% Maharashtra 3% 11% Uttar Pradesh 2% 7% Bihar 3% 15% Madhya Pradesh 1% 4% Assam 1% - Rajasthan 1% 6% Jharkhand 0.5% 5% Gujarat 0.4% - Chhattisgarh 0.6% 2% Haryana 0.3% 2% Punjab 0.1% 2% Tripura 0.2% - Himachal Pradesh 0.2% 0.1% Others 0.5% 0.5% *SHG Data as on Mar 17 (Source: NABARD Status of Microfinance in India-2017), BFIL data as on Dec 17 27

28 FUTURE STRATEGY 28

29 UNMATCHED LEADERSHIP Parameter Status Unique Operating Model Group Lending Rural customer base 100% ~81% Extensive Reach* No. of districts No. of customers Mn Lowest Cost Producer Interest rate Lowest interest rate of 19.75% amongst NBFC- MFI External endorsements Rating/Grading Highest MFI grading MFI 1 Highest Code of Conduct Assessment Grading C1 Corporate Governance rating at CGR2 Highest safety Short-term rating at A1+ Multiple AAA rated securitised pools 29

30 THE MOST EFFICIENT MFI IN THE GLOBE Medium Term Strategic Priorities: Target % Metric Marginal cost of Borrowing Sub-20 Interest Rate to Borrower Cumulative next 2 years salary increase to field staff Cost to Income Ratio Annualised earnings growth Drivers Balance sheet strength Stellar repayment record Judicious sources mix Low marginal cost of borrowing Scale & Efficiency Productivity & Efficiency Technology initiatives Scale AUM growth Operating leverage Non-Loan revenue Status Q3FY18 8.5* *on and off b/s loans (including processing fees) 30

31 CREATIVE DISTURBANCE TO ASSET-REVENUE-EARNING CORRELATION Medium-Term Targets Earnings Revenues 10% 15% 85% 10.5% Assets* 2.8% 5% 90% 1.0% MFI Non - MFI Non-MFI Actuals 9MFY18 95% *Note: Core microfinance will continue to be more than 95% of credit assets 31

32 PILOT ON RETAIL DISTRIBUTION AND SERVICE POINTS (RDSP) 32

33 WE MEET OUR BORROWERS 52 TIMES A YEAR Center Meeting Unique Distribution Channel Door Step Delivery Providing Financial & Non-Financial Products Convenient Day: Monday to Friday Convenient Timings: Between 7 AM to 11 AM During Center Meeting Hours, At any moment: 8,500+ Center Meetings take place & more than 2.6 lakh borrowers are met across the country AND WE UTILISED THIS CHANNEL FOR FACILITATION OF MULTIPLE FINANCIAL AND NON FINANCIAL PRODUCTS. DIGITAL AND PROCESS INITIATIVES HAVE HELPED REDUCE CENTER MEETING DURATION 45 mins 35 mins 20 mins More time for value added activities at center meeting EARLIER CENTER MEETING DURATION WITH TAB AND PAPERLESS WITH CASHLESS AND RDSP More center meetings per SM per day 33

34 With RDSP Current* RDSP CREATES A PARADIGM SHIFT IN CLIENT CONNECT AND PRODUCES MULTITUDE OF OPPORTUNITIES Cashless Coll., RDSP 1 Bank/ATM for cash deposit and withdrawal, travels 5-8 kms, spending up to 2 hours 2 80% of our members travel for electricity bill payment. Travels 2-5 km, spending up to 1 hour Travels to 3 88% of our members visit Kirana store for ration items, travels less than 0.5 km, spending up to 15 minutes Customer % of our members visit electronics store for DTH / mobile recharge, travels 1-5 kms, spending up to 30 minutes 51% travel to Municipality office for water bill payment, travels 1-5 kms, spending up to 30 minutes Online shopping, only 5% customer reported access to this RDSP CAN PROVIDE ACCESS TO THESE SERVICES AT THE SHORTEST DISTANCE THUS REDUCING MULTIPLE VISITS AND SAVES TIME FOR MEMBERS Deposits and withdrawals point Customer Travels to < 0.5 km *Source: 5,456 customers surveyed across Karnataka, Odisha and UP 1 RDSP Bill payments and recharges Allied and OTC financial services Cross sell and e- commerce Single window for all requirements 34

35 RDSP PILOT THE MODEL IS PROVEN THROUGH CENTER MEETINGS U N I T S I N L A K H S Mobile Phones 27 Solar Lamps 23 RDSP Leveraging distribution strength Sewing machines Cycles Mixer grinders Cooking stoves Water purifiers Refrigerator Two wheelers Last mile for leading retailers OVER 57 LAKH NON FINANCIAL UNITS FACILITATED* IMMENSE E-COMMERCE POTENTIAL WITH RDSP IN PLACE EXISTING PARTNERS POTENTIAL BUSINESS OPPORTUNITY E Commerce Railway ticketing OTC insurance *Cumulative units facilitated of non financial products as of Dec 17 35

36 UPDATE ON CASHLESS AND E-KYC 36

37 97% CASHLESS DISBURSEMENTS IN Q3FY18 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 90% 97% 97% 17% Q4FY17 Q1FY18 Q2FY18 Q3FY18 CASHLESS PROCESS CASHLESS DISBURSEMENT PROCESS Center meeting Proposal on TAB Customer Consent E- KYC Instant Credit Bureau E-sign ABPS based Loan disbursal Confirmati on to Customer Sangam Manager checks the willingness for a new loan in the center meeting Loan details are recorded in the proposal screen on the tab Customer consent is taken and the biometric details are captured E-KYC is done using online UID data check. This happens instantly in the center meeting Parallel CB check happens and the customers eligibility for the loan and the loan amount gets determined Loan amount is approved and loan proposal is e- signed Disbursement is done on the same day in the Aadhar linked bank account through ABPS Customer gets the disbursement confirmation through an SMS 37

38 E-KYC, E-SIGN AND INSTANT CB ROLLED OUT ACROSS ALL BRANCHES Benefits Immediate member authentication Eliminates risk of fake borrowers Instant Approval. Reduced Loan Processing TAT Increased Business Volume Time saving in center meeting and at the back office. Better competitive advantage. E-KYC Cashless Disbursem ent Instant CB E-sign Minimize the risk of theft and robbery. Minimize the risk of high volume cash carrying and transactions Digitized Loan Application Saves CM by reducing signature on Loan Application Step Forward to Paper Less 38

39 LOANS FOR HOUSING IMPROVEMENT & TWO-WHEELER (PILOT) 39

40 HUGE UNMET DEMAND FOR RURAL HOME IMPROVEMENT/EXTENSION LOANS Gap filled by: Own funds - 66%; Family, Friends & Money Lenders - 34%. Rs. 8,377 Crores ($1.3 bn) * Annual Disbursement Rs. 1,40,000 Crs. ($22bn) Annual Demand Assumptions Rural households: 166 mn Basis: Census 2011 Adjustment : 46 mn For service difficulties: 20% For rented houses: 5% (source: NSSO survey) For HHs with no house: 4 mn (Source: NSSO survey) Addressable HH: 120 mn Annual no. of HH : 14 mn % of HHs having spent on construction in last 1 yr (Source NSSO survey): 12% Avg. credit requirement: Rs 100,000 per household *FY15 disbursement of PSBs Rs.5,231 Crs and HFCs Rs.3,146 crs (< Rs.5 lacs ticket size) Source:(NHB Report on Trend & Progress of Housing in India 2015 ) Dollar Exchange rate for 27 th April 2017 Rs. 64/- 40

41 NO FORMAL LENDER DUE TO OPERATING CHALLENGES IN THIS SPACE PILOT DETAILS No Rural Focused Player Our Product Offering Metro Urban Semi Urban Rural Salaried Very High High Moderate No Competition Professionals High Moderate Low No Competition Self Employed Moderate Low Very Low No Competition Operating Challenges in Rural Purpose Home improvement and extension Eligibility Criteria Should have completed at least 3 IGL loan cycles Age between (18 to 55 years) Ticket size Rs. 1,00,000 to Rs. 3,00,000 Loan Tenure LTV (Loan to Value Ratio) Repayment Frequency 3 to 5 years Maximum 50% of the property value or 75% of the work estimate whichever is lower Monthly Lack of title deeds High Transaction costs Lack of skilled manpower for technical and legal assessment 41

42 42 LOANS FOR TWO WHEELER Product Details Purpose Eligibility Purchase of Two Wheeler Member of Joint Liability Group Minimum Two IGL Loan cycle completed Should not have availed IGL/MTL/LTL in last 12 weeks Exposure to borrower capped to Rs. 1 Lac across all the lenders Ticket Size Rs. 33,044 to Rs. 51,500 Loan Tenure Loan To Value Repayment Frequency 104 Weeks 80% of on-road price of the vehicle (subject to a maximum amount of Rs. 51,500) Weekly Note: Pilot resumed from April 17 Portfolio outstanding for Two wheeler loans as on 31 st Dec 17 Rs. 1.0 Crs (no. of outstanding loans 389)

43 Q3FY18 PERFORMANCE HIGHLIGHTS 43

44 HIGHLIGHTS OF Q3FY18 Operational Efficiency Credit Quality 97% cashless disbursement in Q3FY18 Healthy addition of 8.6 lacs customers in Q3FY18 vis-à-vis 6.3 lacs in Q2FY18 Loan disbursements^^ grew by 10% QoQ to Rs. 4,712 Crs in Q3FY18 (Rs. 4,288 Crs in Q2FY18) Non-AP Gross Loan Portfolio^^ grew by 34% YoY and 8% QoQ to Rs.11,466 Crs as of Dec 31, Cumulative Collection efficiency of 99.8% for loans disbursed amounting to Rs. 16,635 Crs between 1 st Jan to 31 st Dec 17 Portfolio originated between 1 st Jan to 31 st Dec 17 constitutes 89% of Gross Loan portfolio^^ as on 31 st Dec 17 Net NPA reduces to 0.2% Financial Efficiency P&L Impact Marginal cost of Borrowings* reduced to 8.5% in Q3FY18 from 8.9% in Q2FY18 Weighted avg. cost of borrowing** reduced to 9.5% in Q3FY18 (10.4% in Q3FY17) Incremental drawdowns of Rs.2,293 Crs (including assignment and securitization transactions) in Q3FY18 (growth of 119% YoY). BFIL also originated Rs.217 Crs under managed portfolio in Q3FY18 Completed Assignment and Securitisation transaction of Rs. 653 Crs and Rs. 420 Crs in Q3FY18 respectively Profit of Rs. 163 Crs in Q3FY18 (growth of 14% YoY and 36% QoQ) Key Balance Sheet Figures AUM^^ of Rs.11,466 Crs as on Dec 31, 2017 Networth of Rs.2,757 Crs and Capital adequacy at 31.0% as of Dec 31, 2017 Cash & Cash equivalent^ of Rs.1,156 Crs as of Dec 31, 2017 MAT Credit of Rs.31 Crs. has been recognised on the balance sheet in Q3FY18 Accumulated MAT credit is Rs. 282 Crs as on Dec 31, The un-availed deferred tax benefit of Rs.182 Crs will be available to offset tax on future taxable income. * Includes on and off balance sheet borrowings and including processing fees. ** On-B/S - daily average including processing fees. ^ Excluding security deposit. ^^Includes On balance sheet, Securitised, assigned and Managed loans 44

45 OPERATIONAL HIGHLIGHTS 45

46 HEALTHY ADDITION OF 8.6 LACS CUSTOMERS IN Q3FY18 VIS-À-VIS 6.3 LACS IN Q2FY18 Particulars Dec-16 Dec-17 YoY% Sep-17 QoQ% Branches 1,391 1,513 9% 1,452 4% Centers (Sangam) 2,74,773 3,08,273 12% 2,95,140 4% - Centers in non-ap States 2,25,888 2,59,386 15% 2,46,253 5% Employees (i) + (ii) + (iii) + (iv) + (v) + (vi)+(vii) 14,823 16,015 8% 15,389 4% Field Staff (i) + (ii) + (iii) + (iv) + (v) 14,146 15,420 9% 14,716 5% Sangam Managers* (i) 9,422 9,960 6% 9,470 5% Sangam Manager Trainees(ii) % Branch Management Staff (iii) 2,866 2,991 4% 2,841 5% Area Managers (iv) % 272 3% Regional Office Staff (v) 1,171 1,266 8% 1,200 5% Central Processing Unit and Member helpline (vi) % % Head Office Staff (vii) % 363 7% Members in non-ap States (in '000) 6,585 6,627 1% 6,336 5% Members added (in the quarter) (in 000) % % Active borrowers in non-ap States (in '000) 5,530 5,756 4% 5,318 8% Active borrowers added (in the quarter) (in 000) % % No. of loans disbursed (in '000) 1,583 2,319 46% 2,112 10% Disbursements (for the quarter) (INR Crs.) 2,981 4,712 58% 4,288 10% Gross loan portfolio Non-AP (INR Crs.) (A+B+C+D) 8,531 11,466 34% 10,597 8% Loans outstanding (A) 6,891 9,003 31% 8,435 7% Securitized (B) % % Assigned (C) 60 1, % Managed loans (D) % 679 1% Operational Efficiency Non-AP : Off-take Avg (Disbursements/ No of Loans disbursed) (INR) 18,828 20,315 8% 20,305 - Off-take Avg Excluding Cross Sell 22,287 24,940 12% 24,514 2% Gross loan portfolio/ Active Borrowers (INR) 15,426 19,919 29% 19,925 - Gross loan portfolio/ No. of Sangam Managers (Rs. '000) 9,569 12,086 26% 11,768 3% Active borrowers / No. of Branches 4,396 4,171-5% 4,032 3% Active borrowers / No. of Sangam Managers % 591 3% *Sangam Managers (SMs) are our loan officers who manage our centers (also called Sangams). As of Dec 17, we had 9,487 SMs in Non-AP States 46

47 Q3FY18 DISBURSEMENT IS IN LINE WITH HISTORICAL TREND OF SEASONALITY INR crore FY15 - Rs. 6,860 FY16 - Rs. 12,063 FY17 - Rs. 14,667 FY18 - Rs. 19,500* 4,062 3,769 4,016 3,902 3,734 4,288 4,712 2,489 2,369 2,657 2,974 2,981 1,148 1,684 1,538 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Disbursement % for the year 17% 25% 22% 36% 20% 22% 25% 34% 26% 27% 20% 27% 19% 22% 24% * Guidance Note: Demonetisation distorted the historical trend of seasonality in FY17 47

48 IMPROVING OPERATING COST AND FINANCIAL EFFICIENCY Best before AP MFI crisis Worst during AP MFI crisis FY14 FY15 FY16 FY17 Q3 FY17 Q2FY18 Q3FY18 Productivity Non-AP: Borrowers/ SM 489* Gross Loan Portfolio/ SM ('000) 3,640* 1,320 6,275 8,994 12,141 10,574 9,569 11,768 12,086 Offtake Avg. 10,299* 9,237 11,849 12,273 15,024 18,676 18,828 20,305 20,315 Offtake Avg. (Excl Cross-sell) 10,383* 11,021 12,277 14,149 18,102 21,491 22,287 24,514 24,940 Cost Efficiency: Financial cost / Avg. Gross Loan Portfolio 6.6% 9.8% 8.3% 8.3% 8.5% 7.3% 7.5% 7.0% 6.5% On B/S daily Wt. Avg. Cost of borrowings % (excl. processing fees & other charges) 9.7%^ 12.9%^ 13.0% 12.8% 11.7% 10.7% 10.6% 9.7% 9.5% On B/S daily Wt. Avg. Cost of borrowings % 10.3%^ 16.0%^ 13.9% # 13.5% # 12.0% # 10.9% # 10.8% # 9.8% # 9.8% # Opex/ Avg. Gross Loan Portfolio % 10.4% 21.7% 9.6% 9.5% 7.1% 6.5% 6.6% 6.3% 7.0% Cost to Income Ratio 52.4% 275% 74.5% 61.1% 48.3% 50.0% 49.5% 48.6% 53.1% Credit Quality - Non-AP: Gross NPA% 0.20%* 5.5% 0.1% 0.1% 0.1% 6.0% 0.1% 5.2% 4.6%^^ Net NPA% 0.16%* 2.9% 0.1% 0.1% 0.04% 2.7% 0.03% 0.3% 0.2% *Enterprise figures includes figures from AP state ^Cost of borrowing for Best before AP MFI crisis and Worst during AP MFI crisis calculated on monthly averages and daily Wt. Avg. Cost of borrowings % Includes processing fee for on and off balance sheet funding for the said periods, # Includes processing fee for on b/s funding only, for FY 14 Rs. 13 Crs, FY15 Rs Crs, FY16 Rs.10.5 Crs,FY17 Rs Crs, Q3FY17 Rs. 3.3 Crs, Q2FY18 Rs. 1.1 Crs and Q3FY18 Rs. 5.3 Crs ^^ Rs Crs write offs in Q3FY18 48

49 PORTFOLIO MIX CONCENTRATION NORMS State % Metric % Cap on Disbursement* POS % Cap of Networth* Odisha Bihar West Bengal Karnataka Maharashtra Uttar Pradesh Kerala Rajasthan Jharkhand Madhya Pradesh Haryana Chattisgarh Punjab Uttarakhand Delhi Himachal Pradesh 17.4% 17.4% 14.8% 13.1% 12.2% 11.4% 11.6% 13.3% 10.6% 12.4% 7.1% 8.2% 6.0% 5.4% 5.6% 4.5% 4.6% 4.3% 4.3% 4.2% GLP Q3FY18 1.9% GLP Q3FY17 1.9% 1.7% 1.4% 1.7% 1.6% 0.4% 0.8% 0.1% 0.1% 0.1% 0.1% State District Branch NPA Collection efficiency <15% (20% for Karnataka & Odisha) <3 % (4% for Karnataka & Odisha) <1 % (1.25 % for Karnataka & Odisha) No disbursement to a branch with NPA > 1 % No disbursement to a branch with ontime collection efficiency of < 95% 75% (100% for the state of Odisha, Karnataka and Maharashtra) 5% (Only 5% of total operating districts can go up to 10% of Networth) 1% (Only 5% of the total operating branches can go up to 2% of Networth ) 15% Cap on portfolio outstanding for each state (20% for Karnataka and Odisha) *Subject to tolerance of 10% Note: Portfolio percentage are based on proportion of gross loan portfolio of respective states. 49

50 VINTAGE OF NON-AP BRANCHES IS 7.4 YEARS PORTFOLIO OUTSTANDING BY ECONOMIC ACTIVITY State No. of Branches Wt. Avg. Vintage (in Yrs.)* Purpose % Mix Karnataka Odisha Bihar Uttar Pradesh Maharashtra West Bengal Rajasthan Livestock 36% Agriculture 17% Grocery stores and other retail outlets 8% Tailoring, Cloth weaving 8% Vehicle repairs 7% Trading of Vegetable & fruits 5% Madhya Pradesh Kerala Masonry, Painting, Plumbing, Electrician, Carpenter and related 4% Jharkhand Chhattisgarh Haryana Punjab Uttarakhand Delhi Himachal Pradesh Non-AP 1, *As of Dec 2017 Trading of Agri-commodities 3% Eateries 3% Garments & Footwear retailing 3% Bangles Shop 0.5% Trading of Utensils, Plastic items 0.4% Scrap Business 0.3% Other income generating activities 5% 50

51 INDUSTRY UPDATE ON CREDIT QUALITY 51

52 CREDIT BUREAU DATA ON (30 + DPD) MFI INDUSTRY PORTFOLIO SIGNIFIES THE STRENGTH OF JLG LENDING MODEL, WEEKLY REPAYMENT FREQUENCY AND NON-URBAN GEOGRAPHIES JLG* Vs. Non-JLG model (30 + DPD) Repayment Frequency^ (30 + DPD) 33.4% BFIL has 100% of its loans in JLG format 17.5% BFIL has 100% of its loans in Weekly repayment format 7.3% 7.2% 5.1% Non-JLG *JLG Joint liability group lending model JLG Monthly Fortnightly Weekly ^ The above data excludes 6% of Industry s portfolio, which has been categorized as others in repayment frequency. Urban Vs. Non-Urban (30 + DPD) 21.0% Urban 9.4% Non-Urban Source Industry report by Equifax on Microfinance database as on Oct 17. This also includes data reported by Banks under Microfinance database. # MFI portfolio in Top 50 Cities (by Population) of India are taken as Urban portfolio 52

53 UPDATE ON DEMONETISATION 53

54 CUMULATIVE COLLECTION EFFICIENCY OF 99.8% FOR LOANS DISBURSED BETWEEN 1 ST JAN TO 31 st DEC 17 DATA FOR LOANS DISBURSED BETWEEN 1 st JAN 17 to 31 st Dec 17 State Disbursements Gross Loan Portfolio (31-Dec-17) Cumulative Collection Efficiency Odisha 2,986 1, % Bihar 2,701 1, % West Bengal 2,223 1, % Karnataka 1,833 1, % Maharashtra 1, % Uttar Pradesh 1, % Kerala 1, % Rajasthan % Jharkhand % Madhya Pradesh % Chattisgarh % Haryana % Punjab % Uttarakhand % Delhi % Himachal Pradesh % Total 16,635 10, % Constitutes 89% of Gross Loan Portfolio as on 31 st Dec 17 i.e. 89% = (Rs. 10,179/11,466 Crs)

55 REVIEW OF FINANCIALS 55

56 STRONG SOLVENCY AND SUFFICIENT LIQUIDITY INR Crs. Networth Capital Adequacy 2,671 2,561 2,757 RBI Requirement 31.0% 15.0% Q3FY17 Q2FY18 Q3FY18 Q3FY18 Drawdowns* Cash and Cash Equivalent^ 2,529 2,293 1,824 1,651 1,048 1,156 Q3FY17 Q2FY18 Q3FY18 Q3FY17 Q2FY18 Q3FY18 *Excluding Managed Loans Rs. 217 Crs in Q3FY18 ^ Excluding security deposit - Rs. 337 Crs in Q3FY18 56

57 PROFIT AFTER TAX FOR Q3FY18 AT RS. 163 CRS GREW BY 36% YOY AND 14% QOQ Disbursements Non-AP Gross Loan Portfolio Gross Revenue INR Crs. 58% YoY 10% QoQ 34% YoY 8% QoQ 20% YoY 4,288 4,712 8,531 10,597 11, ,981 Q3FY17 Q2FY18 Q3FY18 Net Interest Income* Q3FY17 Q2FY18 Q3FY18 Operating Cost Q3FY17 Q2FY18 Q3FY18 PAT % YoY % QoQ % YoY 21% QoQ Q3FY17 Q2FY18 Q3FY18 Q3FY17 Q2FY18 Q3FY18 Q3FY17 Q2FY18 Q3FY18 * Net interest income (excluding loan processing fees) = Interest income on Portfolio loans + Excess interest spread on securitization/income from assignment + BC Fee Financial Cost 57

58 ROBUST EARNINGS MODEL DELIVERS IMPROVED PROFITABILITY Particulars Q3FY17 Q3FY18 YoY% Q3FY18 As % of Total Q2FY18 QoQ% Revenue Income from Operations (A) Interest income on Portfolio loans % 73% 384 4% Excess interest spread on securitization / Assignment % 11% 40 55% Loan processing fees % 7% 32 13% INR Crs. Other Income (B) Income on investments % 3% 21-29% Recovery against loans written off % % Facilitation fees from Cross-sell % 3% 14 17% BC fees % 3% 13 9% Other miscellaneous income % % Total Revenue (C) = (A+B) % 100% 505 8% Financial expenses (D) % 33% 176 1% Personnel expenses % 27% % Operating and other expenses % 8% 39 12% Depreciation and amortization 3 4 3% 1% 3 12% Total Operating Cost (E) % 36% % Total Expenditure (F) = (D+E) % 69% % Profit before Provision & Write-offs (G)= (C-F) % 31% 169 1% Provision & Write-offs (H) % 2% 50-83% Profit before Tax = (G-H) % 30% % Tax expense % 6% 32-3% MAT Credit Entitlement (29) (31) -5% -6% (32) 3% Profit after Tax % 30% % Profit for the period % 30% % 58

59 ROBUST EARNINGS MODEL DELIVERS IMPROVED PROFITABILITY Particulars 9MFY17 9MFY18 YoY% 9MFY18 As % of Total Revenue Income from Operations (A) Interest income on Portfolio loans 941 1,110 18% 73% Excess interest spread on securitization / Assignment % 10% Loan processing fees % 7% INR Crs. Other Income (B) Income on investments % 4% Recovery against loans written off % - Facilitation fees from Cross-sell % 3% BC fees % 3% Other miscellaneous income % - Total Revenue (C) = (A+B) 1,319 1,512 15% 100% Financial expenses (D) % 35% Personnel expenses % 25% Operating and other expenses % 8% Depreciation and amortization 9 9 8% 1% Total Operating Cost (E) % 33% Total Expenditure (F) = (D+E) 866 1,033 19% 68% Profit before Provision & Write-offs (G)= (C-F) % 32% Provision & Write-offs (H) % Profit before Tax = (G-H) % 16% Tax expense % 5% MAT Credit Entitlement (191)* (75) -60% -5% Profit after Tax % 16% Profit for the period % 16% *9MFY17 MAT credit entitlement comprises tax expenses of Rs. 94 Crs and unrecognised MAT credit of Rs. 97 Crs as on 31 March,

60 QoQ REVENUE VARIANCE ANALYSIS (1/2) INR Crs. Particulars Q2FY18 (A) Q3FY18 (B) Variance(B-A) Comments Below factors lead to increase in interest income on portfolio 1. Increase in yield (Q3FY18 =18.7%, Q2FY18 = 18.6%) Int. on portfolio % Avg. Daily On B/S portfolio increase in Q3FY18. (Q3FY18 = Rs. 8,438 Crs, Q2FY18 = Rs. 8,193 Crs) 1. Rs. 3 Crs = 0.1% * Rs. 8,438 Crs *92/ Rs. 12 Crs = (Rs. 8,438 Crs Rs. 8,193 Crs )*19.75% *92/365 Income from Securitisation Incremental revenue on account of one securitisation transaction Income from Assignment Loan Processing fees Higher disbursements BC Fees Facilitation fees from Cross-sell No of units facilitated in Q3FY18 is 4.7 Lacs units vs 4.0 Lacs units in Q2FY18 Income from Investments (6) Recovery from write-offs Misc Total Income from investments declined by 29% QoQ on account of daily Avg. interest yielding investments declining by 30% 60

61 QoQ EXPENSES VARIANCE ANALYSIS (2/2) Particulars Q2FY18 Q3FY18 Variance Comments INR Crs. Finance Costs (A+B) Interest expense (Excluding processing fees & other charges) - (A) (1.6) Processing fees & other charges -(B) Personnel expenses Other Operating expenses Decline in Avg. daily borrowings cost from 9.75% in Q2FY18 to 9.49% in Q3FY Increase in Avg. daily borrowings (Rs. 6,942 in Q2FY18 and Rs. 7,060 in Q3FY18) ( Rs. 1.6 Crs ) = (9.75% * 6, % * 7,060) 1. Rs. 16 Crs incremental cost on account of ESOPs grant in Oct Rs. 5 Crs one-time field staff bonus 3. Rs. 7 Crs increase in field staff incentives in-line with business growth Write-offs/Loss (C+D+E) Write-offs -(C) Rs Crs on b/s loans write-offs Loss on Securitised Portfolio- (D) Rs Crs Loss on short collections against securitised portfolio Loss on Managed Loans- (E) Rs. 0.1 Crs shortfall settlement against managed loans Provisions (F+G+H+I) 28.1 (19.8) NPA Provisions On B/S Portfolio -(F) 24.6 (21.4) 1. Rs crs provision reversal on account of write-offs 2. Rs. 3.7 crs provision reversal on account of GNPA reduction QoQ Provisions on Managed Loans -(G) Rs. 1.2 Crs provisions on incremental portfolio originated after 31 st Mar 17 Provisions on Securitised Portfolio (H) (5.8) (5.5) Rs. 5.5 Crs provisions reversal on securitised portfolio based on company s provisioning policy Provisions on Standard assets - (I) Rs. 6.0 Crs incremental provisions towards standard assets Total Provisions/Loss/Write-offs

62 ANALYSIS OF REDUCTION IN GNPA AND RELATED PROVSIONS INR Crs. INR Provisions reversal of INR 21.4 Crs in Q3FY18 INR 3.7 Crs reversal due to GNPA reduction = INR 17.7 Crs reversal due to write-offs Period -> Asset Classification: Amount O/s 30-Sep-17 Provision Pre-write offs Amount O/s (31-Dec-17) Provision Post-write offs Amount O/s (31-Dec-17) Provision Standard 1% Provisioning (A) 7, , , Sub-Standard -50% Provisioning (B) Loss 100% Provisioning (C) GNPA (B+C) Total (A+B+C) 8, , , GNPA Reduced from INR 441 Crs to INR 429 Crs GNPA Reduced from INR 429 Crs to INR 411 Crs due to INR 17.7 Crs write-offs 62

63 STRONG CAPITAL BASE AND ROBUST LIQUIDITY DRIVE BFIL BALANCE SHEET Particulars Q3FY17 Q3FY18 YoY% Q2FY18 QoQ% Equity Share Capital % Stock Options Outstanding % 46 37% Reserves And Surplus 2,508 2,555 2% 2,376 8% Capital & Reserves 2,671 2,757 3% 2,561 8% Loan Funds 6,295 7,240 15% 7,319-1% Payable Towards Assignment/Securitisation % % Expenses & Other Payables % 57-57% Provision For Taxation % 2 - Unamortised Loan Processing Fees % 88 10% Employee Benefits Payable % 20 43% Interest Accrued But Not Due On Borrowings % 34 12% Provision For Leave Benefits & Gratuity % 34-19% Statutory Dues Payable % 16-40% Unrealised Gain On Securitisation Transactions % 22 89% Provision For Standard And NPA - Non-AP % Liabilities 6,783 8,253 22% 8,303-1% Total Liabilities 9,454 11,008 16% 10,863 1% Fixed Assets % 16-1% Intangible Assets 6 6-2% 6-10% Investment Cash And Bank Balances (Incl. Security Deposits) 2,169 1,493-31% 1,990-25% Trade Receivable % Interest Accrued And Due On Loans % 3-84% Interest Accrued But Not Due On Loans % 17 35% Interest Accrued But Not Due On Deposits With Banks % 26-13% Interest Strip On Securitization Transactions % 22 89% Portfolio Loans -- Non-AP 6,817 8,888 30% 8,340 7% Portfolio Loans AP Loans Placed As Collateral % 95 20% Security Deposits For Rent And Other Utilities 4 4 5% 4 3% Advances For Loan Cover Insurance % 2-39% Loans To BFIL Employee Benefit Trust % 2-30% Advance Income Tax % 30 31% Prepaid expenses % 13 26% MAT credit entitlement % % Other Advances / Other Assets % 36 35% Total Assets 9,454 11,008 16% 10,863 1% Note:1 Non-AP Securitized/Managed/Assigned Portfolio 1,639 2,464 50% 2,162 14% 2. Non-AP Gross Loan Portfolio 8,531 11,466 34% 10,597 8% INR Crs. 63

64 ROA OF 4.9% AND ROE OF 24.5% FOR Q3FY18 Particulars Q3 FY17 Q2 FY18 Q3 FY18 Spread Analysis (as % of Avg. Quarterly Gross Loan Portfolio) Gross Yield (I) 20.7% 20.0% 19.7% Portfolio Yield* (a) 17.5% 17.3% 17.2% Financial Cost (b) 7.5% 7.0% 6.5% NIM on portfolio (a-b) 10.1% 10.3% 10.7% Operating Cost (c) 6.6% 6.3% 7.0% Provision and Write-offs (d) 0.2% 2.0% 0.3% Taxes # (e) 1.3% 1.3% 1.1% Total Expense II = (b+c+d+e) 15.5% 16.5% 14.9% Return on Avg. Gross Loan Portfolio (I) - (II) 5.2% 3.5% 4.8% Efficiency: Cost to Income 49.5% 48.6% 53.1% Asset Quality Non-AP: Gross NPA 0.1% 5.2% 4.6% Net NPA 0.0% 0.3% 0.2% Gross NPA (INR Crs.) Net NPA (INR Crs.) Leverage: Debt : Equity Debt : Equity (Incl. Securitised, Assigned & Managed Loans) Capital Adequacy: 36.2% 31.0% 31.0% Profitability: Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) (Excl. MAT Credit)^** 4.0% 2.8% 4.0% ROE (Excl. MAT Credit)^** 17.5% 14.1% 19.8% Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) (Incl. MAT Credit)^** 5.1% 3.8% 4.9% ROE (Incl. MAT credit)^** 22.0% 19.2% 24.5% EPS - Diluted (INR) (Not Annualized) Book Value (INR) *Portfolio Yield = (Int. income on portfolio loans + Excess interest spread on securitization and Asset Assignment + BC Fee ) /Avg. GLP # Tax calculated excluding MAT credit entitlement of Rs.29 Crs for Q3FY17, Rs. 32 Crs for Q2FY18 and Rs. 31 Crs for Q3FY18. ^ Q3FY17,Q2FY18,Q3FY18 MAT credit entitlement comprises tax expenses of Rs. 29 Crs, Rs. 32 Crs and Rs. 31 Crs respectively. ** Calculated based on Quarterly Average 64

65 NET NPA REDUCES TO 0.2%, STRONG CAPITAL ADEQUACY AT 31.0% Particulars 9M FY17 9M FY18 Spread Analysis (as % of Avg. Quarterly Gross Loan Portfolio) Gross Yield (I) 20.8% 19.7% Portfolio Yield* (a) 17.8% 17.0% Financial Cost (b) 7.2% 6.9% NIM on portfolio (a-b) 10.6% 10.1% Operating Cost (c) 6.5% 6.6% Provision and Write-offs (d) 0.4% 3.1% Taxes # (e) 1.5% 1.0% Total Expense II = (b+c+d+e) 15.6% 17.5% Return on Avg. Gross Loan Portfolio (I) - (II) 5.3% 2.2% Efficiency: Cost to Income 47.4% 51.2% Asset Quality Non-AP: Gross NPA 0.1% 4.6% Net NPA 0.03% 0.2% Gross NPA (INR Crs.) Net NPA (INR Crs.) Leverage: Debt : Equity Debt : Equity (Incl. Securitised, Assigned & Managed Loans) Capital Adequacy: 36.2% 31.0% Profitability: Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) (Excl. MAT Credit)^** 4.2% 1.8% ROE (Excl. MAT Credit)^** 21.7% 8.9% Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) (Incl. MAT Credit)^** 6.6% 2.6% ROE (Incl. MAT credit)^** 34.1% 12.8% EPS - Diluted (INR) (Not Annualized) Book Value (INR) *Portfolio Yield = (Int. income on portfolio loans + Excess interest spread on securitization and Asset Assignment + BC Fee ) /Avg. GLP # Tax calculated excluding MAT credit entitlement of Rs.94 Crs for 9MFY17 and Rs. 75 Crs for 9MFY18. ^ 9MFY17 MAT credit entitlement comprises tax expenses of Rs. 94 Crs and Rs. 97 Crs unrecognised MAT credit as on 31 st March, 2016 and 9MFY18 MAT credit entitlement comprises tax expenses of Rs. 75 Crs respectively. ** Calculated based on Quarterly Average 65

66 GUIDANCE FOR FY18 FY17 FY18 Actual Guidance Incremental debt requirement 7,918 14,500 Non-AP Disbursement 14,667 19,500 Non-AP Gross Loan Portfolio 9,150 13,500 PBT PAT (Incl. MAT Credit) 290* 435 INR Crs. * Including Rs. 97 Crs of MAT credit as on 31 st March,

67 FINANCIAL ARCHITECTURE 67

68 FINANCIAL ARCHITECTURE INR Crs. Lenders Mix* Devoid Of Dependence Risk On Balance Sheet* Q3FY17 Q2FY18 Q3FY18 Bank of India 8% 9% 9% SIDBI 5% 7% 7% Yes Bank 7% 7% 7% Kotak Mahindra Bank 6% 6% 6% Dena Bank 6% 7% 6% IDFC Bank 7% 6% 6% RBL Bank 5% 6% 5% HDFC Bank 2% 6% 5% Axis Bank 3% 1% 5% ICICI Bank 6% 4% 5% HSBC Bank 3% 4% 5% Bank of Maharashtra 6% 5% 5% Standard Chartered Bank 3% 4% 4% State Bank Group 10% 6% 4% Union Bank of India 4% 3% 4% IDBI Bank 6% 4% 3% Mudra 1% 3% 3% Mahindra & Mahindra Financial Services Ltd 0% 3% 3% Andhra Bank 1% 3% 2% Citi Bank 2% 2% 2% Others 9% 5% 4% Total 5,429 6,684 6,793 * Includes Term loan and cash credit facilities Diversified Source Mix Q3FY 17 % Mix Q2FY 18 % Mix Q3FY 18 % Mix Term Loans 5,378 67% 6,607 69% 6,791 69% Assignment 69 1% 1,087 11% 1,293 13% Securitisation % 533 6% 673 7% Managed Loans 728 9% 595 6% 614 6% CP 466 6% 386 4% 247 3% NCD 400 5% 250 3% 200 2% CC 51 1% 77 1% % Total 8, % 9, % 9, % Investor Mix (Off B/S) Broad-based Securitised / Assigned Q3FY17 Q3FY18 State Bank Group - 44% Bank of India 7% 21% HDFC Bank 19% 19% Yes Bank 37% 10% IDBI Bank 11% 4% DCB Bank 7% 1% ICICI Bank 8% - Kotak Mahindra Bank 10% - RBL Bank 1% - Total 1,028 1,966 68

69 SUB 9% MARGINAL COST OF BORROWING Funding Cost Analysis Metric FY14 FY15 FY16 FY17 Q3FY17 Q2FY18 Q3FY18 on and off b/s loans (excluding processing fees) 12.2% 11.7% 10.1% 9.4% 9.9% 8.9% 8.4% Marginal Cost of Borrowings on and off b/s loans (including processing fees)* on b/s loans (excluding processing fees) on b/s loans (including processing fees)* 12.6% 11.9% 10.2% 9.4% 10.0% 8.9% 8.5% 12.9% 12.3% 11.0% 9.8% 9.9% 9.1% 8.6% 13.6% 12.6% 11.1% 9.9% 10.0% 9.2% 8.8% on and off b/s loans (excluding processing fees) 12.7% 12.3% 11.4% 10.2% 10.2% 9.5% 9.3% Daily Average Wt. avg. cost of borrowing # on and off b/s loans (including processing fees) on b/s loans (excluding processing fees) on b/s loans (including processing fees) 13.6% 13.0% 11.6% 10.4% 10.4% 9.6% 9.5% 13.0% 12.8% 11.7% 10.7% 10.6% 9.7% 9.5% 13.9% 13.5% 12.0% 10.9% 10.8% 9.8% 9.8% on and off b/s loans (excluding processing fees) 12.2% 11.6% 10.9% 10.0% 10.0% 9.3% 9.0% Monthly Average Wt. avg. cost of borrowing # on and off b/s loans (including processing fees) on b/s loans (excluding processing fees and other charges) on b/s loans (including processing fees) 13.0% 12.2% 11.1% 10.1% 10.2% 9.4% 9.3% 12.8% 12.2% 11.4% 10.5% 10.4% 9.6% 9.4% 13.7% 12.8% 11.6% 10.7% 10.7% 9.7% 9.7% Loan Processing Fees (INR Crs.) Drawdowns (INR Crs.) 3,503 5,020 7,317 6,900 1,048 2,529 2,293 Financial Cost^ 8.3% 8.3% 8.5% 7.3% 7.5% 7.0% 6.5% * processing fees is amortized for marginal cost calculation. ^ Financial expenses to quarterly Avg. Gross Loan Portfolio. # Excluding Managed Loans, Expenses towards loan processing fees are recognized upfront whereas loan processing fees received from borrowers are amortized over the period of contract. 69

70 POSITIVE ALM MISMATCH BENEFIT CONTINUES ALM Avg maturity of assets Avg maturity of liabilities No. of months FY14 FY15 FY16 FY17 Q3FY17 Q2FY18 Q3FY18 ALM data includes Securitized/ Assigned loans Interest Rate Mix of Borrowings* Floating Fixed 44% 61% 43% 54% 52% 63% 60% 56% 39% 57% 46% 48% 37% 40% FY14 FY15 FY16 FY17 Q3FY17 Q2FY18 Q3FY18 * Excludes managed loans 70

71 EXTERNAL ASSESMENT Rating Instrument Rating/Grading Rating Agency Rating Amount Limits (Rs. Crs.) Q2FY18 Q3FY18 MFI Grading MFI 1 CARE Ratings N/A N/A Code of Conduct Assessment C1 ICRA Limited N/A N/A Corporate Governance Rating CGR2+ ICRA Limited N/A N/A Bank Loan Rating (Long-term facilities) CARE A+ CARE Ratings Bank Loan Rating (Short-term facilities) CARE A1+ CARE Ratings 6,500 7,000 Long-term Debt (NCD) CARE A+ CARE Ratings Short-term Debt (CP/NCD) CARE A1+ CARE Ratings Long-term Debt [ICRA] A+ ICRA Limited Short-term Debt [ICRA] A1+ ICRA Limited 750^ 750^ Securitisation Pool CARE AA (SO) ^^ CARE AAA (SO)^^ CARE Ratings 1,765* 1113* ICRA AA (SO) # ICRA Limited 961* 1164* ^Subject to Long-term borrowings limit of Rs. 300 Crs *Amount aggregates to 4 transactions rated by CARE Ratings and 3 transactions rated by ICRA # Three transactions are rated as AA(SO). ^^ Three transactions are rated as AA(SO) and One transaction is upgraded to AAA(SO). 71

72 RISK MANAGEMENT 72

73 KEY RISKS AND MANAGEMENT STRATEGIES Risk Management Key Risks Political Risk Concentration Risk Operational Risk Liquidity Risk Management Strategy Responsible lending and fair pricing Geographic & dependence norms Cash management system and process controls Liquidity metrics Low cost lender Voluntary Cap on RoA from core lending Robust Customer grievance redressal (CGR) Mechanism with Ombudsman Geographic concentration norms - Disbursement Related Caps - Portfolio Outstanding Related Caps Integrated cash management system Product and process Design ISO Certified Internal audit Well defined metrics for - Cash burn - Optimal liquidity test - Liquidity cap Calibrated Growth Borrowing dependence norms - Cap on borrowing from any single credit grantor (15% of funding requirement) 73

74 CAPITAL STRUCTURE 74

75 CAPITAL STRUCTURE AS ON 31 st DEC 2017 Reliance Mutual Fund Route One Morgan Stanley Mauritius Matthews Wellington East Bridge Capital Birla Sun Life Mutual Fund Amansa Capital PTE Limited Alliancebernstein Tree Line Vanguard BNP Paribas Arbitrage Societe Generale OHM Stock Broker Pvt Ltd. DSP Blackrock MIRAE Asset Goldman Sachs Asset Management William Blair Sandstone Kismet Microfinance Goldman Sachs P Note Kismet SKS II Smallcap World Fund Kotak Offshore JP Morgan Funds SBI Life Insurance SIDBI Blackrock Others 6.1% 4.0% 3.8% 3.7% 3.4% 3.3% 3.2% 3.2% 2.9% 2.8% 2.4% 2.3% 2.1% 1.9% 1.9% 1.8% 1.7% 1.7% 1.7% 1.6% 1.6% 1.4% 1.3% 1.2% 1.2% No. of shares Crs. 1.2% 1.1% 1.1% 34.4% Foreign Corporates, 5.8% Domestic MFs, Insurance co's & FIs, 20.4% SHAREHOLDING PATTERN FII, 11.0% FPI, 49.7% Domestic Individuals, 9.1% NRI, 1.5% Domestic Corporates, 2.6% Excludes no. of Outstanding ESOPs 0.65 Crs. Note: The Investment under different accounts by a fund are clubbed under their respective names 75

76 ADJUSTED PRICE TO BOOK COMPUTATION INR Dec-17 Book value per share (A) 198 Present value of DTA per share (B)^ 12 Book value per share Including PV of DTA (A+B) 210 Adjusted Price to Book Ratio (times) 4.9 Note: ^ Estimated Present Value of Deferred Tax Assets(DTA). DTA as on Dec 31, 2017 is Rs. 182 Crs. Discount rate assumed at 10% and applied over next 1.25 years estimated profit. BFIL Market Price as of Jan 29, 2018 Rs. 1,032 76

77 ANNEXURES 77

78 OUR PROVISIONING POLICY RBI norms for NBFC- MFIs BFIL compliance Asset Classification Standard Assets 0-90 days 0-8 weeks Sub-Standard Assets days >8-25 weeks Loss Assets >180 days >25 weeks and expired contracts> 8 weeks Provisioning Norms Standard Assets 1% of overall Portfolio reduced by Provision for NPA (If provision for NPA < 1% of overall Portfolio) 0.4% - 1% depending on NPA or as stipulated by RBI, whichever is higher Sub-Standard Assets 50% of instalments overdue* 50% of outstanding principal* Loss Assets 100% of instalments overdue* 100% of outstanding principal/ write-off* Provisioning Norms for Securitised & Managed loans - As per the Company s provisioning policy for on-balance sheet loans net of losses, subject to the maximum guarantee given in respect of these arrangements. * The aggregate loan provision will be maintained at higher of 1% of overall portfolio or as per company s provisioning policy. 78

79 ANNEXURES - OPERATIONS 79

80 GROUP UNDERWRITING AT WORK 75% 83% 11% 87% 7% LOAN CONVERSION TO NEXT CYCLE 84% 8% 87% 88% 88% 90% 91% 7% 6% 6% 6% 5% 14% 27% 48% 42% 42% 40% 43% 48% 51% 61% 45% 32% 35% 39% 41% 39% 37% 34% IGL - 2 IGL - 3 IGL - 4 IGL - 5 IGL - 6 IGL - 7 IGL - 8 IGL - 9 IGL - 10 Conversion from IGL to IGL Conversion from IGL to LTL Conversion from IGL to MTL Note: The above data is as on 30 th Sep 16 (Pre demonetisation period). Active IGL loans disbursed during Jan 15 to Mar 15 have been considered as base and loans disbursed in subsequent cycles over the next 1.5 yrs i.e. till Sep 16 have been taken and cycle wise conversion has been arrived. Only the next first loan taken by customer is taken into consideration for conversion. 80

81 Q2FY11 (PRE-CRISIS) Q3FY18 JLG MODEL ENSURES EFFECTIVE CONTROL ON AVERAGE INDIVIDUAL EXPOSURE, IRRESPECTIVE OF ACTUAL LOAN ELIGIBILITY 55,000 45,000 35,000 25,000 15,000 5,000-5,000 Income Generating Loan 24,800 ^ ^ Eligibility Amount (INR) Avg. Offtake Long Term Loan 29,800 29,800 29,800 29,800 29,800 29,800 29,800 29,800 29,800 26,885 26,155 23,298 25,017 24,066 23,819 23,740 24,152 24,192 24,232 44,650 36,943 54,950 54,950 Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 Cycle 6 Cycle 7 Cycle 8 Cycle 9 Cycle 10 Cycle 1 Cycle 2 Cycle 3 Mid Term Loan 29,350 29,350 29,350 29,350 29,350 29,350 29,350 29,350 29,350 41,402 43,181 20,890 20,333 23,505 22,138 21,685 21,205 20,859 20,767 20,535 20,321 18,950 Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 Cycle 6 Cycle 7 Cycle 8 Cycle 9 Cycle 10 Income Generating Loan 36,000 42,000 50,000 50,000 50,000 50,000 50,000 50,000 12,000 24,000 15,120 16,920 18,060 18,500 19,000 19,500 21,000 22,000 21,000 10,200 Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 Cycle 6 Cycle 7 Cycle 8 Cycle 9 Cycle 10 ^ Note: Maximum Offtake eligibility for IGL (1 year Tenure) : June-11 to Dec 15 Rs. 15,000; Dec 15 IGL 1 Rs.20,000, IGL 2 Rs.30,000 till Mar 17 and Post Mar 17 for IGL 1 is Rs. 24,800 and IGL 2 is Rs. 29,800 81

82 CYCLE WISE NON-AP LOAN BORROWERS Cycle Wise Q3FY17 Q2FY18 Q3FY18 IGL 1 43% 30% 33% IGL 2 15% 23% 23% IGL 3 6% 8% 9% IGL 4 1% 3% 3% IGL 5 0.5% 1% 1% IGL 6 1% 1% 1% IGL 7 1% 1% 1% IGL 8 1% 1% 1% IGL 9 0.3% 0.7% 1% Total IGL Borrowers 70% 68% 72% LTL 1 20% 16% 13% LTL 2 1% 3% 4% Total LTL Borrowers 21% 19% 17% MTL 1 6% 8% 7% MTL 2 2% 2% 2% MTL 3 1% 1% 1% MTL 4 0.3% 0.5% 1% MTL 5 0.2% 0.3% 0.3% MTL 6 0.1% 0.3% 0.2% Total MTL Borrowers 9% 12% 12% Cross Sell 0.3% 0.3% 0.2% Total IGL + LTL + MTL + Cross Sell 100% 100% 100% Note: Customers having IGL & MTL loans, have been grouped under respective IGL loan cycle Customers having LTL & MTL loans, have been grouped under respective LTL loan cycle MTL clients represents borrowers with only MTL loans Cross-sell clients represents borrowers with only cross-sell loans 82

83 DIFFERENCES IN LENDING MODEL BETWEEN SHG & JLG Model SHG Savings led (Members collectively save money for 6 months to avail credit) JLG (BFIL) Credit led (No savings required, members have an access to the finance as per the requirement) Borrowers Segment Women/Men Women Lending Methodology Group (Size members) Group (5 members) Loan Processing time 4 Months 1 week Repayment frequency Monthly Weekly Credit Decision Credit Bureaus Reporting Group leader decides the quantum of loan for the member Not much information available (RBI mandated the SHGs to share data from July 2016) Entire group and the center decides the quantum of loan Weekly sharing of the data with CICs SHG Concentration: Top 5 States % Mix in Portfolio (Mar-17) Portfolio O/S (Mar-17) INR Crs. Andhra Pradesh 28% 17,406 Telangana 20% 12,053 Karnataka 13% 8,149 Tamil Nadu 10% 6,047 West Bengal 8% 4,842 Others 21% 13,084 Total 100% 61,581 Source: NABARD 83

84 PRODUCT OFFERINGS IGL MTL LTL Other product offerings^^ Loan portfolio (INR Crs) / (% Mix) 5,687 (50%) 3,641 (32%) 2,024 (18%) 114 (1.0%) # Ticket size range INR 7,050 to INR 29,800 INR 7,500 to INR 29,350^ INR 30,900 to INR 54,950 INR 1,899 to INR 5,450 Avg. Ticket Size (INR) For Q3FY18 24,622 21,094 39,121 2,291 Eligibility* Completion of CGT / GRT Age limit 18 years to 58 years Maximum limit of INR. 24,800 for IGL 1 With IGL - Between 19th to 44th week With LTL Between 19th to 94th week Maximum limit of INR. 20,890 for MTL1 Minimum One IGL Loan cycle completed Maximum limit for LTL 1 post IGL 1 - INR. 34,800** Maximum limit for LTL 1 post IGL 2 - INR. 44,650** With IGL Between 4th to 44th week With LTL Between 4th to 94th week With MTL Between 4th to 71st week Tenure 50 weeks 75 weeks^ 104 weeks 25 weeks Annual effective interest rate 19.75% (w.e.f 7 th Dec 15 for new loans) 19.60% % Processing fee (Incl. Good & Service Tax) 1.18% for Non-BC branches For BC Branches % for Loan amount >Rs, 25,000 - Zero processing fee for loans <Rs. 25,000 for BC branches * Eligibility criteria over and above the criteria prescribed by the RBI 0.7% -1.18% ^^Loans for Mobile Phones, Solar lamps, Sewing Machines, Bicycle, Bio-Mass Stove, Water-purifier(Excluding Two wheeler loans and loans for refrigerator which are in pilot stage). # Portfolio Including Two wheeler loans pilot of Rs.1.0 Crs & Loans for of Rs..5 crs for Refrigerator. ^w.e.f Aug, 2016 Tenure has been changed from 50 weeks to 75 weeks and ticket sizes are changed. ** With effect from 27 th November

85 PRODUCT WISE - DISBURSEMENT, PORTFOLIO OUTSTANDING AND TICKET SIZE IGL LTL MTL Others* Total Q3FY17 Q2FY18 Q3FY18 No. of Loans Disbursed in ' ,583 % Mix 44% 4% 35% 17% 100% Amount of Loan Disbursed (In Crs.) 1, , ,981 % Mix 51% 9% 38% 2% 100% Portfolio Outstanding (In Crs.) 4,066 2,022 2, ,531 % Mix 48% 24% 28% 1% 100% Avg. Ticket Size INR 21,955 38,079 20,704 2,345 18,828 No. of Loans Disbursed in '000 1, ,112 % Mix 53% 5% 23% 19% 100% Amount of Loan Disbursed (In Crs.) 2, , ,288 % Mix 63% 10% 24% 2% 100% Portfolio Outstanding (In Crs.) 4,994 1,858 3, ,597 % Mix 47% 18% 34% 1% 100% Avg. Ticket Size INR 24,500 38,623 21,316 2,209 20,305 No. of Loans Disbursed in '000 1, ,319 % Mix 52% 7% 21% 20% 100% Amount of Loan Disbursed (In Crs.) 2, , ,712 % Mix 63% 13% 22% 2% 100% Portfolio Outstanding (In Crs.) 5,687 2,024 3, ,466 % Mix 50% 18% 32% 1% 100% Avg. Ticket Size INR 24,622 39,121 21,094 2,303 20,315 *Cross sell products 85

86 LEVERAGING THE DISTRIBUTION STRENGTH FY15 FY16 FY17 Q3FY17 Q2FY18 Q3FY18 Total Total Total Total Total Solar lamp Mobile phone Sewing Machine Cycle Others^ Total No. of Units Facilitated (in Lacs) Gross Fees (after service tax) INR Crs Less: Incentives INR Crs Net Fees INR Crs.* Loan Portfolio INR Crs Net Fee Income as % of PAT** 12.6% 9.3% 13.5% 4.2% 6.7% 2.5% 1.7% 0.4% 0.1% 0.7% 5.3% Loan Portfolio Mix 1.4% 1.3% 0.4% 0.8% 0.9% 0.3% 0.4% 0.1% - 0.2% 1.0% *Net fee post the incentive payout and sans transfer pricing of other operating cost and Post MAT adjustment ^Loans for Bio-Mass Stove, Water-purifier, Solar Fans, Two Wheelers, Mixer Grinder and Refrigerator ** PAT before MAT credit entitlement of Rs.97 Crs as on 31-Mar-16 for FY17. Penetration Based On Total No. Of Loans FY14 FY15 FY16 FY17 9MFY18 Cumulative past 4.75 years Solar Lamp 1.1% 5.9% 8.0% 9.2% 13.4% 37.6% Mobile Phone 1.9% 6.7% 10.7% 5.9% 7.6% 32.7% Sewing Machine - 0.2% 2.0% 1.1% 0.9% 4.1% Bicycle % 1.0% 0.3% 2.9% Mixer Grinder % 1.5% Bio-mass stove - 0.3% 0.7% % Others % 0.1% - 0.6% Total 2.9% 13.0% 23.4% 17.3% 23.8% 80.5% Frequency of Loans Based On Current Member Base Frequency of Loans (for the period) FY14 FY15 FY16 FY17 9MFY18 Cumulative past 4.75 years #1 2.1% 7.1% 12.4% 13.2% 10.2% 30.3% #2 0.1% 0.7% 1.7% 0.7% 0.6% 8.3% # % % # % # % Total 2.2% 7.8% 14.3% 13.9% 10.9% 42.5% Cumulative Cross-sell Penetration % among our existing Non-AP Member base of 6.6 mn for last 4.75 years is 42.5% 86

87 BFIL FINANCIAL INCLUSION COVERAGE Strong reach in under-banked areas 68% of BFIL branches are in RBI BFIL covers 68% of below average & under-banked district list low financial districts identified by 68% of SKS branches are in RBI under-banked districts list SKS covers 68% of below average & low financial CRISIL inclusion districts identified by Crisil SKS 296 districts RBI 375 districts* % CRISIL level of financial inclusion SKS Coverage of those districts High 18% Above average 15% Below average 51% Low 16% Grand Total 100% 68% Weaker & Minority section coverage Weaker & Minority section coverage Women Economically Weaker section Minority 16% 71% 100% * Source: RBI under-banked districts data [1] Source: CRISIL Inclusix: An index to measure India s progress on Financial Inclusion, June IS SUPPORTED BY ROBUST CUSTOMER CENTRIC PRACTISES Doorstep Service Financial literacy Dedicated customer service Doorstep delivery (i.e. at Center meetings) 2 day process consisting of hour-long sessions designed to educate clients on BFIL processes and credit discipline. Toll-free helpline number with seven different vernacular languages 87

88 WHAT ARE CLIENTS DOING POST THE ANDHRA PRADESH MFI CRISIS? Sources of Credit (in the absence of MFI Loans) Reasons for not repaying MFI loans 70% 60% 50% 40% 30% 20% 10% 0% 59% 37% 29% 22% 12% Money Lender SHG Pawn Broker Bank DFC Interest rates charged by informal sources (in the absence of MFIs) Willingness to repay Data relates to Andhra Pradesh & Telangana Source: What are Clients doing post the Andhra Pradesh MFI Crisis?, MicroSave,

89 ANNEXURES - FINANCIALS 89

90 CASH AND CASH EQUIVALENT BALANCES INR Crs. Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Interest Yielding^ ,150 1,606 1, Non Interest Yielding^^ Total ,428 1,941 1,938 1,302 1,043 ^fixed deposits, excluding margin money deposits. ^^Includes current account and cash balances Note: Daily Average figures 90

91 ANNEXURES - TECHNOLOGY 91

92 TECHNOLOGY ADVANCEMENTS DRIVEN BY INDUSTRY LEADING PARTNERSHIPS Initiatives Technology Partner Solution Benefits Mobility driven Jandhan/Aadhaar compliant (JAM) Lending Management Software (LOS & LMS) In-House Team SKS SMART A robust framework that encompasses workflow/reporting and analytic engines Works in online/offline mode to mitigate connectivity challenges. TABLETS - Hand held device for field staff Enterprise Mobility Enhances Productivity of SMs- Reduced time spent at both center meeting and back office Paper less transaction - Pre-printed loan application form. JAM Compliant Agent Banking for Cash less transactions and Cross-Sell In-House Team SKS SMART Agent A Mobile, Jan-Dhan / Aaadhar compliant door step banking solution with full eco-system is in place ERP Implementation ERP ERP - Automation of financial accounting/ investment management, procurement and payment process. Migrated from on-premises system to hosted exchange Office 365 Enhanced security, 99.99% uptime, On mobile office 365 access. Additional products such as One-Drive, Enterprise Skype etc. for easy access of data and better communication. Data Centre Migration to Cloud Data Centre Hosting On-demand capacity scale-up. Business Continuity Plan. 92

93 ANNEXURES HR 93

94 ATTRITION RATE AT SANGAM MANAGER LEVEL IS LARGELY CONTRIBUTED BY NEW JOINEES. EXCLUDING NEW JOINEES, THE AVG. VINTAGE IS 3.4 YEARS Sangam Manager Attrition % Who? When? 32% (Annualised) for 9MFY18 Sangam managers who earn lesser average monthly performance incentive i.e. ~Rs. 3,500 vis-à-vis ~Rs. 7,500 for other Sangam Managers. Majority of the staff who leaves the job, decides to leave within first year from joining date. Vintage of SMs Exited 9MFY18 Member Services %Mix < 6 Months 28% 6 Months - 1 Yr. 26% 1-2 Yrs. 32% 2-3 Yrs. 7% > 3 Yrs. 7% Avg. Vintage (Yrs.) As on Dec-17 Why? Retention Strategy * Includes Promoted Sangam Mangers Work conditions such as : Average distance travelled per day is ~30 kms. Work location is different from home location Branch Reporting time at 6:30 AM 2 nd Best paying job (~Rs.16,000 pm) in the local milieu (1 st Govt. Job) High growth career path No lateral recruitments till 4 levels above loan officer. Senior Management 8.6 Middle Management 9.3 Branch Management* 7.5 Sangam Managers 2.5 (3.4^) ^ Avg Vintage of Sangam Managers (Excl. who joined in last one year) i.e. 70% of Sangam Managers is 3.4 Yrs. 94

95 ANNEXURES - COMPLIANCE 95

96 COMPLIANCE WITH RBI NBFC-MFI REGULATORY FRAMEWORK (1/2) NBFC MFIs RBI norms for NBFC-MFIs Qualifying assets to constitute not less than 85% of its total assets (excluding cash and bank balances) At least 50% of loans for income generation activities BFIL compliance Qualifying assets - 95% Income generation loans 99% Pricing Guidelines Income of Borrower s Family Rural : <=Rs.100,000 Non-Rural : <=Rs. 1,60,000 Ticket Size <= 60,000 1 st cycle <= Rs.100,000 Subsequent cycle Indebtedness <= Rs. 100,000 <= Rs. 60,000 Tenure If loan amt. > Rs.30,000, then >= 24 months Collateral Without collateral Repayment Model Weekly, Fortnightly and Monthly 96

97 COMPLIANCE WITH RBI NBFC-MFI REGULATORY FRAMEWORK (2/2) RBI norms for NBFC-MFIs BFIL compliance Pricing Guidelines Interest Rate^ A. Margin cap 10% above cost of borrowings B. Avg. base rate of top 5 commercial banks X 2.75 Margin: 8.0% for 9MFY18 Lower of the A and B. Interest rate 19.75% w.e.f 7 th December 15 for new loans Processing Fees <= 1% of loan amt. Insurance Premium Actual cost of insurance can be recovered from borrower and spouse Administrative charges can be recovered as per IRDA guidelines Penalty No penalty for delayed payment Security Deposit No security deposit/ margin to be taken BFIL has never taken security deposit/ margin ^ W.E.F April 1, Quarterly Margin Cap will be followed- Average interest rate on loans sanctioned during a quarter shouldn t exceed the Avg borrowing cost during the preceding quarter plus margin cap. Avg Borrowing cost of Q3FY18 is 9.8%, Hence Avg. interest rate of loans sanctioned in Q4FY18 shouldn t exceed 19.8%=9.8%+10% 97

98 BFIL LOAN PORTFOLIO QUALIFIES FOR OVERALL PSL TARGET OF 40% AND ALL SUB-TARGETS UNDER NEW PSL NORMS RBI S.no. Sector Category Target for Banks % 1 Agriculture Target 18% - Direct Agriculture* Sub-target ~13.5%* - Direct Small & Marginal farmers* Sub-target 8% Qualifying Portfolio of BFIL % BFIL Explanation 53% Livestock, Agri & Allied 2 Weaker Target 10% 100% 3 Micro-enterprises Target 7.5% 100% 100% Loans are to women beneficiaries (with less than Rs.1 lac). Further, Minority communities constitute 17% and economically weaker sections 72% of loan portfolio. Loans to MFIs for on-lending to microenterprises. Note: * Banks are also directed to ensure overall direct lending to non-corporate farmers, which should not fall below the system wide average of last three years achievement, which is notified as 11.78% as per RBI notification dated 21 st September They should also continue to maintain all efforts to reach the level of 13.5% direct lending to beneficiaries.. Refer Slide no. 50 for details on purpose wise loan portfolio outstanding. 98

99 ANNEXURES INTERNAL AUDIT 99

100 INTERNAL AUDIT PLAYS A CRITICAL ROLE IN ASSESSING PROCESS CONTROLS Strength 222 strong headcount ISO 9001:2008 certified process All branches are inspected monthly based on a 4 tier grading system Top 25 disbursement branches are audited twice in a month Grading linked to incentives/appraisals of field staff Head Office audit by Deloitte Scope Branches 1,513 Branches per Internal Audit staff 7 Regional Offices 31 Scope of Audit Audit area Frequency Client Acqui sition Center Meeting Proces s Document verification (KYC, Loan utilization check etc.) Monitoring process by supervisor s Adheren ce to Process / Policies Statutory Requirement s (Credit bureau, Fair practices etc.) Client Visits * High Risk items (Fraud s etc.) Fixed Assets verific ation^ IGL Branches Monthly Regional Offices Once in a quarter, distributed monthly Head office Quarterly Note: * Approximately 30% of the clients are covered by Internal Audit in an year during the branch audits. Clients visited on a sample basis to check for Loan confirmations, Loan utilization (LUC), arrears and awareness on Client Protection Principles (CPP) ^ Fixed Assets are verified on Annual basis 100

101 THANK YOU For any investor relations queries, please to 101