EARNINGS UPDATE Q4FY18

Transcription

1 EARNINGS UPDATE Q4FY18 APRIL 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 Q4FY18 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 AND RBI 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 12,594 Cr., 73 Lakhs members in Non-AP states and 1,567 branches Sub 20% lending rate 7,677 9,150 12,594 9,150 INR Cr. 12, ,095 INR Cr. Company s non-ap Portfolio grew by 38% (YoY) to INR 12,594 Crs. as of Mar 31, ,171 2,016 2, Profit after tax for Q4FY18 of INR 211 Crs and INR 455 Crs for FY18 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-17 Mar-18 FY13 FY14 FY15 FY16 FY17 FY18 Q4FY17Q4FY18 NII = Interest income on Portfolio loans + Excess interest spread on securitization/income from Assignment + BC Fee Financial Cost Financial Metrics Balanced Geographical mix Diversified Shareholding Strong Balance sheet and liquidity Net worth (INR Cr.) 2,999 Capital Adequacy 33.2% Cash & Cash equivalent (INR Cr.) Efficiency and Profitability 1,858 Marginal cost of borrowing # 8.5% Cost to income 48.5% Return on Asset^* 5.9% Return on Equity* 29.3% Note: Above Data for Q4FY18 Non-AP = excluding states of AP and Telangana # includes on and off b/s borrowings (excluding processing fees) for Q4FY18 ^Assets includes securitized, assigned and managed loans *Including MAT credit Jharkhand 5% Rajasthan 6% Kerala 6% Uttar Pradesh 8% Madhya Pradesh 4% Maharashtra 10% Others 6% Karnataka 11% Note: Portfolio as of Mar 31, 2018 Odisha 16% Bihar 15% West Bengal 13% Figures rounded off to the nearest digit across the presentation Amansa Capital PTE Limited Birla Sun Life Mutual Fund Top 10 Shareholders Reliance Mutual Fund Route One Wellington East Bridge Capital Matthews Alliancebernstein Blackrock Tree Line Note: Shareholding as of Mar 31, % 3.3% 3.2% 3.1% 3.0% 2.8% 2.8% 2.8% 4.8% 8.4% 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 7.6 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 one of the low cost lender (interest rate at sub 20%) 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 8.8% to PAT for FY18 Pan-India presence with no unbalanced geographic sectoral exposure Strong solvency (Capital Adequacy of 33.2% as on 31 st Mar 2018) 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 70,207 11,466 INR Crs. BFIL Disbursement share 22% in Q3FY18 (Industry total disbursement for Q3FY18 is Rs. 20,998* Crs.) 16% * Capital Reinforced Net worth - Rs. 2,999 crs CAR % (RBI Requirement 15%) 1,229 Others BFIL Oct 10 June 12 Dec 17 8% *Dec 17 Includes data for NBFC-MFIs & SFBs (source: MFIN) 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 Cost to Income 74.5% 50.4% 48.5% FY14 FY18 Q4FY % Marginal Cost of Borrowing # FY14 FY18 8.7% 8.6% # On and Off balance sheet borrowings (excl. Managed Loans) including processing fees Q4FY

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% 44% 38% Mar-13 Mar-18 Sep-10 Mar-18 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 7.6 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 9.6 Crore No. of loan records (live) 6.8 Crore^ No. of borrower records (live) 3.9 Crore^ No. of MFIs reporting 175 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 Dec 17 70,207 # * Source: Equifax (as on Feb 18), Excluding A.P and Telangana # as per MFIN; Dec 17 - Includes data for NBFC-MFIs & SFBs ^ DPD. 20

21 STEADY-STATE ROA OF 4% CAN BE TARGETED Interest rate Processing fee Tax 34% Marginal Cost of borrowings for FY18: 8.7%. 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 50% IGL (1 Yr. loan), 21% LTL (2 Yr. loan) and 29% MTL (1.5 Yr. loan) 21

22 GROWTH ANATOMY 22

23 7.25 YEAR CAGR FOR THE SECTOR AND BFIL ARE 13% AND 16% RESPECTIVELY Industry GLP BFIL GLP 61,623 ^ 70,207^ ^ 59,573 11,466 38,386 50,535 7,677 9,150 8,531 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 Dec'16 Dec'17 Sep'10 Dec'11 Mar'12 Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Dec'16 Dec'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 & Dec 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- Mar'18 20% 80% 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% 42% 13% 2% 19% 21% 25% 13% FY 07-10* FY 10-13^ FY 13 - FY18^ FY 07- FY18* -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* 13% 16% 18% 19% 22% 22% 27% 23% 32% 37% FY-17 FY-18 Q4-FY17 Q3-FY18 Q4-FY18 Hit rate^ for all products* FY-17 FY-18 Q4-FY17 Q3-FY18 Q4-FY18 Rejection Reasons Q4FY18 % Mix 88% 89% 95% 90% 89% ^ Hit rate = % of loan applications with matching record in credit bureau Reasons All Products LTL Loans from=>2mfis 47% 51% =>2MFIs and Outstanding Balance >60K 27% 26% Outstanding Balance>60K 9% 6% =>2MFIs and Default History 7% 7% FY17 FY18 Q4-FY17 Q3-FY18 Q4-FY18 Indebtedness limit (INR) Maximum No. of Lenders Revised BFIL Guidelines # Pre Post # RBI Guidelines 60,000 80, MFIN Guidelines^^ Note: The revised guidelines pertains to JLG loans and does not apply to first time customers (IGL1). Guidelines continue to remain same for IGL1 customers ^^MFIN guidelines revised to 3 lender norms in Sep 17 and indebtedness to INR 80,000 in Apr 18 # With effect from Q1FY19 Eligibility< Min Ticket Size 5% 6% =>2MFIs,Outstanding Balance>60K and Default History 3% 3% Default History 2% 1% Default History and Outstanding Balance >60K 0.3% 0.2% Total 100% 100% *Note: Rejections are done based on data input from Credit bureau. Rejection data is calculated based on unique clients basis. 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% 11% Tamil Nadu 10% - West Bengal 8% 13% Kerala 5% 6% Odisha 3% 16% Maharashtra 3% 10% Uttar Pradesh 2% 8% 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% 0.4% *SHG Data as on Mar 17 (Source: NABARD Status of Microfinance in India-2017), BFIL data as on Mar 18 27

28 FUTURE STRATEGY 28

29 UNMATCHED LEADERSHIP Parameter Status Unique Operating Model Group Lending Rural customer base 100% ~80% Extensive Reach No. of districts No. of customers Mn Low Cost Producer Interest rate Sub 20% lending rate 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 FY18 8.7* % 57% *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% 8.8% Assets* 3.2% 5% 90% 1.2% MFI Non - MFI Non-MFI Actuals FY18 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 We meet 7 mn customer through 3 lacs centre meeting every week 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 29 Solar Lamps 25 RDSP Leveraging distribution strength Sewing machines Cycles Mixer grinders Cooking stoves Water purifiers Refrigerator Two wheelers Last mile for leading retailers OVER 62 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 Mar 18 35

36 UPDATE ON CASHLESS AND E-KYC 36

37 97% CASHLESS DISBURSEMENTS IN Q4FY18 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 90% 97% 97% 97% 17% Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 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 Note: Portfolio outstanding as on 31 st Mar 18 Rs Crs (no. of outstanding loans 30) 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. 54,950 Loan Tenure Loan To Value Repayment Frequency 104 Weeks Maximum 80% of on road price of the vehicle (subject to a maximum amount of Rs. 54,950) Weekly Note: Pilot resumed from April 17 Portfolio outstanding for Two wheeler loans as on 31 st Mar 18 Rs. 3.5 Crs (no. of outstanding loans 967)

43 Q4FY18 PERFORMANCE HIGHLIGHTS 43

44 HIGHLIGHTS OF Q4FY18 Operational Efficiency 95% and 97% cashless disbursement in FY18 and Q4FY18 respectively. Healthy addition of 11.5 lacs customers in Q4FY18 vis-à-vis 8.6 lacs in Q3FY18 Loan disbursements^^ grew by 26% YoY to Rs. 18,472 Crs in FY18 (Rs. 14,667 Crs in FY17) and 22% QoQ to Rs. 5,738 Crs in Q4FY18 (Rs. 4,712 Crs in Q3FY18) Non-AP Gross Loan Portfolio^^ grew by 38% YoY and 10% QoQ to Rs.12,594 Crs as of Mar 31, Credit Quality Cumulative Collection efficiency of 99.8% for loans disbursed amounting to Rs. 22,374 Crs between 1 st Jan 17 to 31 st Mar 18 Portfolio originated between 1 st Jan 17 to 31 st Mar 18 constitutes 95% of Gross Loan portfolio^^ as on 31 st Mar 18 Net NPA at 0.1% Financial Efficiency Marginal cost of Borrowings* reduced to 8.6% in Q4FY18 ( 8.9% in Q4FY17) Weighted avg. cost of borrowing** reduced to 9.3% in Q4FY18 (10.2% in Q4FY17) Incremental drawdowns of Rs.3,771 Crs (including assignment and securitization transactions) in Q4FY18 (growth of 46% YoY). BFIL also originated Rs.586 Crs under managed portfolio in Q4FY18 Completed Assignment and Securitisation transaction of Rs. 1,617 Crs and Rs. 451 Crs in Q4FY18 respectively P&L Impact PAT of Rs. 455 Crs in FY18 (growth of 57% YoY) and Rs. 211 Crs in Q4FY18 (growth of 29% QoQ) Key Balance Sheet Figures AUM^^ of Rs.12,594 Crs as on Mar 31, 2018 Networth of Rs.2,999 Crs and Capital adequacy at 33.2% as of Mar 31, 2018 Cash & Cash equivalent^ of Rs.1,858 Crs as of Mar 31, 2018 MAT Credit of Rs.4 Crs. has been recognised on the balance sheet in Q4FY18 Accumulated MAT credit is Rs. 285 Crs as on Mar 31, The un-availed deferred tax benefit of Rs.117 Crs will be available to offset tax on future taxable income. * Includes on and off balance sheet borrowings and including processing fees **Includes on and off balance sheet - daily average including processing fees. ^ Excluding security deposit. ^^Includes On balance sheet, securitised, assigned and managed loans Figures rounded off to the nearest digit across the presentation. Figures and ratios have been regrouped wherever necessary. 44

45 OPERATIONAL HIGHLIGHTS 45

46 HEALTHY ADDITION OF 11.5 LACS CUSTOMERS IN Q4FY18 VIS-À-VIS 8.6 LACS IN Q3FY18 Particulars Mar-17 Mar-18 YoY% Dec-17 QoQ% Branches 1,399 1,567 12% 1,513 4% Centers (Sangam) 2,79,252 3,35,070 20% 3,08,273 9% - Centers in non-ap States 2,30,367 2,86,183 24% 2,59,386 10% Employees (i) + (ii) + (iii) + (iv) + (v) + (vi)+(vii) 14,755 16,021 9% 16,015 - Field Staff (i) + (ii) + (iii) + (iv) + (v) 14,030 15,418 10% 15,420 - Sangam Managers* (i) 9,157 10,208 11% 9,960 2% Sangam Manager Trainees(ii) % % Branch Management Staff (iii) 2,853 3,077 8% 2,991 3% Area Managers (iv) % 280 1% Regional Office Staff (v) 1,170 1,295 11% 1,266 2% Central Processing Unit and Member helpline (vi) % 205-5% Head Office Staff (vii) % 390 5% Members in non-ap States (in '000) 6,700 7,270 9% 6,627 10% Members added (in the quarter) (in 000) 325 1, % Active borrowers in non-ap States (in '000) 5,324 6,188 16% 5,756 8% Active borrowers added (in the quarter) (in 000) % % No. of loans disbursed (in '000) 1,758 2,768 57% 2,319 19% Disbursements (for the quarter) (INR Crs.) 3,902 5,738 47% 4,712 22% Gross loan portfolio Non-AP (INR Crs.) (A+B+C+D) 9,150 12,594 38% 11,466 10% Loans outstanding (A) 7,176 8,859 23% 9,003-2% Securitized (B) % % Assigned (C) 536 1,971-1,141 73% Managed loans (D) 684 1,034 51% % Operational Efficiency Non-AP : Off-take Avg (Disbursements/ No of Loans disbursed) (INR) 22,194 20,735-7% 20,315 2% Off-take Avg Excluding Cross Sell 23,263 25,852 11% 24,940 4% Gross loan portfolio/ Active Borrowers (INR) 17,187 20,352 18% 19,919 2% Gross loan portfolio/ No. of Sangam Managers (Rs. '000) 10,574 12,886 22% 12,086 7% Active borrowers / No. of Branches 4,205 4,315 3% 4,171 3% Active borrowers / No. of Sangam Managers % 607 4% *Sangam Managers (SMs) are our loan officers who manage our centers (also called Sangams). As of Mar 18, we had 9,774 SMs in Non-AP States 46

47 FY18 DISBURSEMENT IS IN LINE WITH HISTORICAL TREND OF SEASONALITY (EXCEPT FY17) INR crore FY15 - Rs. 6,860 FY16 - Rs. 12,063 FY17 - Rs. 14,667 FY18 - Rs. 18,472 1,148 1,684 1,538 2,489 2,369 2,657 2,974 4,062 3,769 4,016 2,981 3,902 3,734 4,288 4,712 5,738 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 Q4 FY18 Disbursement % for the year 17% 25% 22% 36% 20% 22% 25% 34% 26% 27% 20% 27% 20% 23% 26% 31% 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 FY18 Q4 FY17 Q3FY18 Q4FY18 Productivity Non-AP: Borrowers/ SM 489* Gross Loan Portfolio/ SM ('000) 3,640* 1,320 6,275 8,994 12,141 10,574 12,886 10,574 12,086 12,886 Offtake Avg. 10,299* 9,237 11,849 12,273 15,024 18,676 20,316 22,194 20,315 20,735 Offtake Avg. (Excl Cross-sell) 10,383* 11,021 12,277 14,149 18,102 21,491 24,922 23,263 24,940 25,852 Cost Efficiency: Financial cost / Avg. Gross Loan Portfolio 6.6% 9.8% 8.3% 8.3% 8.5% 7.3% 6.6% 7.4% 6.5% 6.0% 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% 9.6% 10.4% 9.5% 9.2% On B/S daily Wt. Avg. Cost of borrowings % 10.3%^ 16.0%^ 13.9% # 13.5% # 12.0% # 10.9% # 9.8% # 10.6% 9.8% # 9.5% # Opex/ Avg. Gross Loan Portfolio % 10.4% 21.7% 9.6% 9.5% 7.1% 6.5% 6.6% 6.6% 7.0% 6.6% Cost to Income Ratio 52.4% 275% 74.5% 61.1% 48.3% 50.0% 50.4% 59.3% 53.1% 48.5% Credit Quality - Non-AP: Gross NPA% 0.20%* 5.5% 0.1% 0.1% 0.1% 6.0% 2.4%^^ 6.0% 4.6%^^ 2.4%^^ Net NPA% 0.16%* 2.9% 0.1% 0.1% 0.04% 2.7% 0.1% 2.7% 0.2% 0.1% *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, FY18 Rs Crs, Q4FY17 Rs. 3.1 Crs, Q3FY18 Rs. 5.3 Crs and Q4FY18 Rs. 5.3 Crs ^^ Rs Crs and Rs Crs write offs in Q3FY18 and Q4FY18 respectively. 48

49 PORTFOLIO MIX CONCENTRATION NORMS State % Metric % Cap on Disbursement* POS % Cap of Networth* Odisha Bihar West Bengal Karnataka Maharashtra Uttar Pradesh Rajasthan Kerala Jharkhand Madhya Pradesh Haryana Punjab Chattisgarh Uttarakhand Delhi Himachal Pradesh 16.4% 18.2% 14.6% 14.9% 12.6% 12.6% 11.3% 12.4% 10.0% 11.1% 7.7% 6.7% 6.1% 4.5% 5.9% 5.7% 4.7% 4.4% 4.3% 3.8% GLP Q4FY18 2.1% GLP Q4FY17 1.8% 1.9% 1.5% 1.8% 1.6% 0.3% 0.6% 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 Odisha Bihar Karnataka Uttar Pradesh West Bengal Maharashtra Rajasthan Madhya Pradesh Jharkhand Kerala Chhattisgarh Haryana Punjab Uttarakhand Delhi Himachal Pradesh Total 1, *As of Mar 2018 Livestock 39% Agriculture 17% Grocery stores and other retail outlets 8% Tailoring, Cloth weaving 8% Vehicle repairs 6% Trading of vegetable & fruits 5% Trading of agri. Commodities 3% Masonry, painting, plumbing, electrician, carpenter and related 3% Garments & footwear retailing 3% Eateries 2% Bangles shop 0.4% Trading of utensils, plastic items 0.4% Other income generating activities 5% 50

51 INDUSTRY UPDATE ON CREDIT QUALITY 51

52 92% OF BORROWERS HAVE LOANS FROM <= 2 LENDERS % Borrowers - Loans from Lenders % Borrowers - Indebtedness INR 73% 92% 19% 6% 2% 6% 2% 1 lender 2 Lenders 3 Lenders 4 Lenders <60K 60K to 100K >100K RBI Guidelines - 2 NBFC MFIs RBI Guidelines - 100K for NBFC MFIs Portfolio Quality * 1.2% 0.9% 30+ DPD 60+ DPD * Loans disbursed from Feb 17 to Jan 18 Portfolio data as on Jan 18 Note: Lenders include NBFC-MFIs and Banks Source : Equifax on Microfinance database as on Jan 18. Includes data reported by Banks under Microfinance database. 52

53 UPDATE ON DEMONETISATION 53

54 CUMULATIVE COLLECTION EFFICIENCY OF 99.8% FOR LOANS DISBURSED BETWEEN 1 ST JAN 17 TO 31 st MAR 18 DATA FOR LOANS DISBURSED BETWEEN 1 st Jan 17 to 31 st Mar 18 State Disbursements Gross Loan Portfolio (31-Mar-18) Cumulative Collection Efficiency Odisha 3,801 1, % Bihar 3,530 1, % West Bengal 3,024 1, % Karnataka 2,470 1, % Maharashtra 1,970 1, % Uttar Pradesh 1, % Kerala 1, % Rajasthan 1, % Jharkhand 1, % Madhya Pradesh % Haryana % Chattisgarh % Punjab % Uttarakhand % Delhi % Himachal Pradesh % Total 22,374 11, % Constitutes 95% of Gross Loan Portfolio as on 31 st Mar 18 i.e. 95% = (Rs. 11,990/12,594 Crs) 54

55 REVIEW OF FINANCIALS 55

56 STRONG SOLVENCY AND SUFFICIENT LIQUIDITY INR Crs. Networth Capital Adequacy 2,447 2,757 2,999 RBI Requirement 33.2% 15.0% Q4FY17 Q3FY18 Q4FY18 Q4FY18 Drawdowns* Cash and Cash Equivalent^ 3,771 2,576 2,293 2,505 1,858 1,156 Q4FY17 Q3FY18 Q4FY18 Q4FY17 Q3FY18 Q4FY18 *Excluding Managed Loans Rs. 586 Crs in Q4FY18 ^ Excluding security deposit - Rs. 301 Crs in Q4FY18 56

57 PROFIT FOR FY18 OF RS. 455 CRS GROWS BY 57% Disbursements Non-AP Gross Loan Portfolio Gross Revenue INR Crs. 18,472 14,667 2,102 11,466 12,594 1,728 9,150 3,902 4,712 5, Q4FY17 Q3FY18 Q4FY18 FY17 FY18 Net Interest Income* Q4FY17 Q3FY18 Q4FY18 Operating Cost Q4FY17 Q3FY18 Q4FY18 FY17 FY18 PAT , ^ Q4FY17 Q3FY18 Q4FY18 FY17 FY18 Q4FY17 Q3FY18 Q4FY18 FY17 FY18 Q4FY17 Q3FY18 Q4FY18 FY17 FY18 * Net interest income (excluding loan processing fees) = Interest income on Portfolio loans + Excess interest spread on securitization/income from assignment + BC Fee Financial Cost (235) ^ unrecognised MAT credit as on 31 st March,

58 ROBUST EARNINGS MODEL DELIVERS IMPROVED PROFITABILITY Particulars Q4FY17 Q4FY18 YoY% Q4FY18 As % of Total Q3FY18 QoQ% Revenue Income from Operations (A) Interest income on Portfolio loans % 68% 399 1% Excess interest spread on securitization / Assignment % 15% 61 45% Loan processing fees % 7% 37 16% INR Crs. Other Income (B) Income on investments % 2% 15-7% Recovery against loans written off % % Facilitation fees from Cross-sell % 16 43% BC fees % 3% 14 18% Other miscellaneous income % Total Revenue (C) = (A+B) % 100% 544 8% Financial expenses (D) % 31% 178 2% Personnel expenses % 25% 147 2% Operating and other expenses % 8% 44 3% Depreciation and amortization 4 4-6% 1% 4 10% Total Operating Cost (E) % 34% 194 2% Total Expenditure (F) = (D+E) % 64% 373 2% Profit before Provision & Write-offs (G)= (C-F) % 36% % Provision & Write-offs (H) % Profit before Tax = (G-H) (235) % % Tax expense % % MAT Credit Entitlement (16) (4) - - (31) - Profit after Tax (235) % % Profit for the period (235) % % 58

59 ROBUST EARNINGS MODEL DELIVERS IMPROVED PROFITABILITY Particulars FY17 FY18 YoY% FY18 As % of Total Revenue Income from Operations (A) Interest income on Portfolio loans 1,228 1,511 23% 72% Excess interest spread on securitization / Assignment % 11% 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) 1,728 2,102 22% 100% Financial expenses (D) % 34% Personnel expenses % 25% Operating and other expenses % 8% Depreciation and amortization % 1% Total Operating Cost (E) % 33% Total Expenditure (F) = (D+E) 1,176 1,412 20% 67% Profit before Provision & Write-offs (G)= (C-F) % 33% Provision & Write-offs (H) % 11% Profit before Tax = (G-H) % 22% Tax expense % 4% MAT Credit Entitlement (206)* (79) - -4% Profit after Tax % 22% Profit for the period % 22% *FY17 MAT credit entitlement comprises tax expenses of Rs. 109 Crs and unrecognised MAT credit of Rs. 97 Crs as on 31 March,

60 QoQ REVENUE VARIANCE ANALYSIS (1/2) INR Crs. Particulars Q3FY18 (A) Q4FY18 (B) Variance(B-A) Comments Below factors lead to increase in interest income on portfolio Int. on portfolio % Avg. Daily On B/S portfolio increase in Q4FY18. (Q4FY18 = Rs. 8,666 Crs, Q3FY18 = Rs. 8,438 Crs) Rs. 11 Crs = (Rs. 8,666 Crs Rs. 8,438 Crs ) *90/365*19.75% 2. Lesser number of days interest recognition 90 days in Q4FY18, 92 days in Q3FY18 (Rs. 9 Crs )= (Rs. 8,666 Crs)*19.75% *2/365 Income from Securitisation (17) Income from Assignment Loan Processing fees Higher disbursements BC Fees Incremental revenue on account of three assignment transactions ( Rs. 1,617 Crs Assignment in Q4FY18) Daily Avg. Managed portfolio increased to Rs. 790 Crs in Q4FY18 from Rs. 682 Crs in Q3FY18 due to addition of 141 branches under BC arrangement in Q4FY18. Facilitation fees from Cross-sell No of units facilitated in Q4FY18 is 6.0 Lacs units vs 4.7 Lacs units in Q3FY18 Income from Investments (1) Recovery from write-offs Misc Total Income from investments declined by 5% QoQ on account of daily Avg. interest yielding investments declining by 4% 60

61 QoQ EXPENSES VARIANCE ANALYSIS (2/2) Particulars Q3FY18 Q4FY18 Variance Comments INR Crs. Finance costs (Excluding processing fees & other charges) Decline in Avg. daily borrowings cost from 9.49% in Q3FY18 to 9.21% in Q4FY Increase in Avg. daily borrowings (Rs. 7,060 in Q3FY18 and Rs. 7,532 in Q4FY18) Processing fees & other charges Rs. 2.1 Crs = (9.21% * 7, % * 7,060) Personnel expenses Other Operating expenses ~ Rs. 1 Crs on account of CSR expenditure Write-offs/Loss (A+B+C) Write-offs -(A) Rs Crs on b/s loans write-offs Loss on Securitised Portfolio- (B) Rs. 2.6 Crs Loss on short collections against securitised portfolio Loss on Managed Loans- (C) Rs. 0.2 Crs shortfall settlement against managed loans Provisions (D+E+F+G) (19.8) (192.2) NPA Provisions On B/S Portfolio -(D) (21.4) (194.7) Rs Crs provisions reversal on account of write-offs Rs. 4.7 Crs provisions reversal due to GNPA reduction Provisions on Managed Loans -(E) Rs. 4.3 Crs provisions on incremental portfolio originated after 31 st Mar 17 Provisions on Securitised Portfolio (F) (5.5) (2.4) Provisions on Standard assets - (G) Total Provisions/Loss/Write-offs Rs. 2.4 Crs provisions reversal on securitised portfolio based on company s provisioning policy Rs. 0.6 Crs incremental provisions towards standard assets based on company s provisioning policy 61

62 ANALYSIS OF REDUCTION IN GNPA AND RELATED PROVSIONS INR Crs. INR Provisions reversal of INR Crs in Q4FY18 INR 4.7 Crs reversal due to GNPA reduction = INR Crs reversal due to write-offs Period -> Asset Classification: Amount O/s 31-Dec-17 Provision Pre-write offs Amount O/s (31-Mar-18) Provision Post-write offs Amount O/s (31-Mar-18) Provision Standard 1% Provisioning (A) 8, , , Sub-Standard -50% Provisioning (B) Loss 100% Provisioning (C) GNPA (B+C) Total (A+B+C) 9, , , GNPA Reduced from INR 411 Crs to INR 401 Crs GNPA Reduced from INR 401 Crs to INR 211 Crs due to INR Crs write-offs 62

63 STRONG CAPITAL BASE AND ROBUST LIQUIDITY DRIVE BFIL BALANCE SHEET Particulars Q4FY17 Q4FY18 YoY% Q3FY18 QoQ% Equity Share Capital % Stock Options Outstanding % 63 25% Reserves And Surplus 2,275 2,781 22% 2,555 9% Capital & Reserves 2,447 2,999 23% 2,757 9% Loan Funds 7,125 7,617 7% 7,240 5% Payable Towards Assignment/Securitisation % % Expenses & Other Payables % 25-15% Provision For Taxation % 2-94% Unamortised Loan Processing Fees % 96 10% Employee Benefits Payable % 29 11% Interest Accrued But Not Due On Borrowings % 38 14% Provision For Leave Benefits & Gratuity % Statutory Dues Payable % 9 33% Unrealised Gain On Securitisation Transactions % 41-10% Provision For Standard And NPA - Non-AP % % Liabilities 7,971 8,533 7% 8,253 3% Total Liabilities 10,418 11,531 11% 11,008 5% Fixed Assets % 16 5% Intangible Assets 5 5 4% 6-3% Investment Cash And Bank Balances (Incl. Security Deposits) 2,871 2,160-25% 1,493 45% Trade Receivable % 11 - Interest Accrued And Due On Loans % 1-42% Interest Accrued But Not Due On Loans % 23-18% Interest Accrued But Not Due On Deposits With Banks % 22-38% Interest Strip On Securitization Transactions % 41-10% Portfolio Loans -- Non-AP 7,083 8,686 23% 8,888-2% Loans Placed As Collateral % % Security Deposits For Rent And Other Utilities % 4 3% Advances For Loan Cover Insurance % 2-23% Loans To BFIL Employee Benefit Trust % 2-100% Advance Income Tax % 39 4% Prepaid expenses % 16-33% MAT credit entitlement % 282 1% Other Advances / Other Assets % Total Assets 10,418 11,531 11% 11,008 5% Note:1 Non-AP Securitized/Managed/Assigned Portfolio 1,974 3,735 89% 2,464 52% 2. Non-AP Gross Loan Portfolio 9,150 12,594 38% 11,466 10% INR Crs. 63

64 COST TO INCOME IMPROVES TO 48.5% IN Q4FY18 Particulars Q4 FY17 Q3 FY18 Q4 FY18 Spread Analysis (as % of Avg. Quarterly Gross Loan Portfolio) Gross Yield (I) 18.5% 19.7% 19.6% Portfolio Yield* (a) 15.5% 17.2% 16.9% Financial Cost (b) 7.4% 6.5% 6.0% NIM on portfolio (a-b) 8.1% 10.7% 10.8% Operating Cost (c) 6.6% 7.0% 6.6% Provision and Write-offs (d) 15.1% 0.3% 0.02% Taxes # (e) 0.7% 1.1% 0.1% Total Expense II = (b+c+d+e) 29.9% 14.9% 12.7% Return on Avg. Gross Loan Portfolio (I) - (II) -11.3% 4.8% 6.9% Efficiency: Cost to Income 59.3% 53.1% 48.5% Asset Quality Non-AP: Gross NPA 6.0% 4.6% 2.4% Net NPA 2.7% 0.2% 0.1% Gross NPA (INR Crs.) Net NPA (INR Crs.) Leverage: Debt : Equity Debt : Equity (Incl. Securitised, Assigned & Managed Loans) Capital Adequacy: 33.5% 31.0% 33.2% Profitability: Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) (Excl. MAT Credit)^** -8.5% 4.0% 5.8% ROE (Excl. MAT Credit)^** -39.2% 19.8% 28.8% Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) (Incl. MAT Credit)^** -8.0% 4.9% 5.9% ROE (Incl. MAT credit)^** -36.7% 24.5% 29.3% EPS - Diluted (INR) (Not Annualized) (17.0) 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.16 Crs for Q4FY17, Rs. 31 Crs for Q3FY18 and Rs. 4 Crs for Q4FY18. ^ Q4FY17,Q3FY18,Q4FY18 MAT credit entitlement comprises tax expenses of Rs. 16 Crs, Rs. 31 Crs and Rs. 4 Crs respectively. ** Calculated based on Quarterly Average 64

65 NET NPA AT 0.1%, STRONG CAPITAL ADEQUACY AT 33.2% Particulars FY17 FY18 Spread Analysis (as % of Avg. Quarterly Gross Loan Portfolio) Gross Yield (I) 20.1% 19.7% Portfolio Yield* (a) 17.1% 16.9% Financial Cost (b) 7.3% 6.6% NIM on portfolio (a-b) 9.9% 10.2% Operating Cost (c) 6.5% 6.6% Provision and Write-offs (d) 4.2% 2.2% Taxes # (e) 1.3% 0.7% Total Expense II = (b+c+d+e) 19.2% 16.1% Return on Avg. Gross Loan Portfolio (I) - (II) 1.0% 3.5% Efficiency: Cost to Income 50.0% 50.4% Asset Quality Non-AP: Gross NPA 6.0% 2.4% Net NPA 2.7% 0.1% Gross NPA (INR Crs.) Net NPA (INR Crs.) Leverage: Debt : Equity Debt : Equity (Incl. Securitised, Assigned & Managed Loans) Capital Adequacy: 33.5% 33.2% Profitability: Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) (Excl. MAT Credit)^** 0.8% 2.8% ROE (Excl. MAT Credit)^** 3.9% 14.3% Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) (Incl. MAT Credit)^** 2.7% 3.4% ROE (Incl. MAT credit)^** 13.6% 17.3% 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.109 Crs for FY17 and Rs. 79 Crs for FY18. ^ FY17 MAT credit entitlement comprises tax expenses of Rs. 109 Crs and Rs. 97 Crs unrecognised MAT credit as on 31 st March, 2016 and FY18 MAT credit entitlement comprises tax expenses of Rs. 79 Crs respectively. ** Calculated based on Quarterly Average 65

66 GUIDANCE FOR FY19 INR Crs. FY18 FY18 FY19* Guidance Actuals Guidance Incremental debt requirement 14,500 11,167 18,500 Disbursement 19,500 18,472 26,000 Gross Loan Portfolio 13,500 12,594^ 18,000 PBT PAT (Incl. MAT Credit) ^ INR 208 Crs written off in FY18 * FY19 guidance does not consider the synergies on account of proposed merger with Indusind Bank 66

67 FINANCIAL ARCHITECTURE 67

68 FINANCIAL ARCHITECTURE Lenders Mix* Devoid Of Dependence Risk Diversified Source Mix INR Crs. On Balance Sheet* Q4FY17 Q3FY17 Q4FY18 SIDBI 7% 7% 11% IndusInd Bank - - 8% Bank of India 7% 9% 7% ICICI Bank 6% 5% 6% RBL Bank 4% 5% 6% Yes Bank 8% 7% 5% Kotak Mahindra Bank 6% 6% 5% HSBC Bank 4% 5% 5% Standard Chartered Bank 4% 4% 5% Dena Bank 5% 6% 5% Axis Bank 2% 5% 4% IDFC Bank 5% 6% 4% HDFC Bank 3% 5% 4% Bank of Maharashtra 5% 5% 4% Mudra 3% 3% 3% Union Bank of India 4% 4% 3% Citi Bank 2% 2% 3% State Bank Group 9% 4% 3% Mahindra & Mahindra Financial Services Ltd - 3% 2% IDBI Bank 7% 3% 2% Andhra Bank 2% 2% 2% South Indian Bank 2% 1% 1% Others 5% 3% 2% Total 6,018 6,793 7,417 * Includes Term loan and cash credit facilities Q4FY17 % Mix Q3FY18 % Mix Q4FY18 % Mix Term Loan 5,939 64% 6,791 69% 7,416 64% Asset Assignment Managed Loans 628 7% 1,293 13% 2,173 19% 692 7% 614 6% 955 8% Securitisation 823 9% 673 7% 813 7% NCD 400 4% 200 2% 200 2% CC 78 1% CP 707 8% 247 3% - - Total 9, % 9, % 11, % Investor Mix (Off B/S) Broad-based Securitised / Assigned Q4FY17 Q4FY18 State Bank Group 29% 39% IndusInd Bank - 17% Yes Bank 16% 16% Bank of India 14% 10% HDFC Bank 9% 10% Vijaya Bank - 6% IDBI Bank 20% 1% DCB Bank 3% 0.2% Kotak Mahindra Bank 5% - ICICI Bank 3% - Total 1,451 2,986 68

69 SUB 9% MARGINAL COST OF BORROWING Daily Average Monthly Average Marginal Cost of Borrowings Wt. avg. cost of borrowing # Wt. avg. cost of borrowing # Financial Cost^ 8.3% 8.3% 8.5% 7.3% 6.6% 7.4% 6.5% 6.0% * 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. Metric FY14 FY15 FY16 FY17 FY18 Q4FY17 Q3FY18 Q4FY18 on and off b/s loans (excluding processing 12.2% 11.7% 10.1% 9.4% 8.6% 8.8% 8.4% 8.5% fees) on and off b/s loans (including processing 12.6% 11.9% 10.2% 9.4% 8.7% 8.9% 8.5% 8.6% fees)* on b/s loans (excluding processing fees) 12.9% 12.3% 11.0% 9.8% 8.8% 9.2% 8.6% 8.6% on b/s loans (including processing fees)* 13.6% 12.6% 11.1% 9.9% 8.9% 9.3% 8.8% 8.7% on and off b/s loans (excluding processing 12.7% 12.3% 11.4% 10.2% 9.4% 10.1% 9.3% 9.0% fees) on and off b/s loans (including processing fees) on b/s loans (excluding processing fees) on b/s loans (including processing fees) on and off b/s loans (excluding processing fees) 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) Funding Cost Analysis 13.6% 13.0% 11.6% 10.4% 9.5% 10.2% 9.5% 9.3% 13.0% 12.8% 11.7% 10.7% 9.6% 10.4% 9.5% 9.2% 13.9% 13.5% 12.0% 10.9% 9.8% 10.6% 9.8% 9.5% 12.2% 11.6% 10.9% 10.0% 9.2% 9.7% 9.0% 8.9% 13.0% 12.2% 11.1% 10.1% 9.4% 9.9% 9.3% 9.2% 12.8% 12.2% 11.4% 10.5% 9.6% 10.0% 9.4% 9.4% 13.7% 12.8% 11.6% 10.7% 9.8% 10.2% 9.7% 9.7% Loan Processing Fees (INR Crs.) Drawdowns (INR Crs.) 3,503 5,020 7,317 6,900 9,977 2,576 2,293 3,771 69

70 POSITIVE ALM MISMATCH BENEFIT CONTINUES ALM Avg maturity of assets No. of months Avg maturity of liabilities FY14 FY15 FY16 FY17 FY18 Q4FY17 Q3FY18 Q4FY18 ALM data includes Securitized/ Assigned loans Interest Rate Mix of Borrowings* Floating Fixed 44% 61% 43% 54% 55% 54% 60% 55% 56% 39% 57% 46% 45% 46% 40% 45% FY14 FY15 FY16 FY17 FY18 Q4FY17 Q3FY18 Q4FY18 * Excludes managed loans 70

71 EXTERNAL ASSESMENT Rating Instrument Rating/Grading Rating Agency Rating Amount Limits (Rs. Crs.) Q3FY18 Q4FY18 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 7,000 7,500 & 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, * ICRA AA (SO) # Provisional ICRA AA (SO) # ICRA Limited 1,164 1,402* & Rating amount limit revised from INR 7,000 Crs. to INR 7,500 Crs on 06 Apr-18 for Borrowings outstanding as on 31 Mar-18 ^Subject to Long-term borrowings limit of INR 300 Crs. *Amount aggregates to 3 transactions rated by CARE Ratings and 3 transactions rated by ICRA # Two transactions are rated as AA(SO) and one transaction has provisional AA (SO). ^^ One transactions is rated at AA(SO) and two transactions are 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)* * Cap for Indusind Bank at 25%. 73

74 CAPITAL STRUCTURE 74

75 CAPITAL STRUCTURE AS ON 31 st MAR 2018 Reliance Mutual Fund 8.4% SHAREHOLDING PATTERN Route One 4.8% Wellington East Bridge Capital 3.4% 3.3% FPI, 50.2% Amansa Capital PTE Limited 3.2% Matthews 3.1% Alliancebernstein 3.0% Blackrock 2.8% Birla Sun Life Mutual Fund 2.8% Tree Line 2.8% DSP Blackrock MIRAE Asset Societe Generale OHM Stock Broker Pvt Ltd. 2.6% 2.1% 2.0% 1.9% Foreign Corporates, 5.8% Goldman Sachs Asset Management 1.8% Morgan Stanley Mauritius 1.8% Sandstone Kismet Microfinance American Century World Mutual Funds Kismet SKS II Smallcap World Fund BNP Paribas Arbitrage Kotak Offshore 1.7% 1.6% 1.4% 1.4% 1.3% 1.3% 1.3% Domestic MFs, Insurance co's & FIs, 21.9% FII, 8.9% Domestic Individuals, 9.3% NRI, 1.5% Domestic Corporates, 2.5% Vanguard Emerging Markets Stock Index 1.2% JP Morgan Funds 1.2% Copthall Mauritius Investment Limited Vanguard 1.2% 1.1% No. of shares Crs. SBI Life Insurance 1.1% SIDBI 1.1% Others 33.0% Excludes no. of Outstanding ESOPs 0.6 Crs. Note: The Investment under different accounts by a fund are clubbed under their respective names 75

76 ADJUSTED PRICE TO BOOK COMPUTATION INR Mar-18 Book value per share (A) 215 Present value of DTA per share (B)^ 5 Book value per share Including PV of DTA (A+B) 220 Adjusted Price to Book Ratio (times) 5.2 Note: ^ Estimated Present Value of Deferred Tax Assets(DTA). DTA as on Mar 31, 2018 is Rs. 117 Crs. Discount rate assumed at 10% and applied over next year estimated profit. BFIL Market Price as of Apr 23, 2018 Rs. 1,160 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) Q4FY18 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 24,336 26,831 26,664 25,939 24,588 24,031 23,895 24,221 24,570 24,437 44,650 38,571 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 44,356 46,446 20,890 20,272 29,350 29,350 29,350 29,350 29,350 29,350 29,350 29,350 29,350 25,583 23,871 23,218 23,129 22,765 22,566 22,562 22,012 22,272 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 Q4FY17 Q3FY18 Q4FY18 IGL 1 38% 33% 38% IGL 2 19% 23% 18% IGL 3 6% 9% 9% IGL 4 2% 3% 3% IGL 5 1% 1% 1% IGL 6 1% 1% 1% IGL 7 1% 1% 1% IGL 8 1% 1% 1% IGL 9 0% 1% 1% Total IGL Borrowers 68% 72% 72% LTL 1 20% 13% 11% LTL 2 2% 4% 5% Total LTL Borrowers 22% 17% 17% MTL 1 6% 7% 7% MTL 2 2% 2% 2% MTL 3 0.7% 1% 1% MTL 4 0.4% 1% 0.6% MTL 5 0.2% 0.3% 0.3% MTL 6 0.1% 0.2% 0.3% Total MTL Borrowers 10% 12% 11% Cross Sell 0.2% 0.2% 0.4% 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) 6,337 (50%) 3,605 (29%) 2,507 (20%) 146 (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 1,310 to INR 6,906 Avg. Ticket Size (INR) For Q4FY18 25,081 21,495 40,448 2,316 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, Loans for home improvement and loans for refrigerator which are in pilot stage). # Portfolio Including Two wheeler loans pilot of Rs.3.5 Crs, for loans for Home improvement Rs. 0.7 crs & Loans for of Rs. 1.9 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 Q4FY17 Q3FY18 Q4FY18 No. of Loans Disbursed in ' ,758 % Mix 47% 6% 42% 5% 100% Amount of Loan Disbursed (In Crs.) 1, , ,902 % Mix 49% 10% 40% 0.5% 100% Portfolio Outstanding (In Crs.) 4,059 1,945 3, ,150 % Mix 44% 21% 34% 0.4% 100% Avg. Ticket Size INR 23,416 38,491 20,976 2,147 22,194 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 No. of Loans Disbursed in '000 1, ,768 % Mix 49% 9% 21% 22% 100% Amount of Loan Disbursed (In Crs.) 3, , ,738 % Mix 59% 17% 21% 3% 100% Portfolio Outstanding (In Crs.) 6,337 2,507 3, ,594 % Mix 50% 20% 29% 1% 100% Avg. Ticket Size INR 25,081 40,448 21,495 2,394 20,735 *Cross sell products 85

86 LEVERAGING THE DISTRIBUTION STRENGTH No. of Units Facilitated (in Lacs) FY15 FY16 FY17 FY18 Q4FY17 Q3FY18 Q4FY18 Mobile Solar Sewing Total Total Total Total Total Total Cycle Phone lamp Machine Others^ Total 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% 8.8% -1.1% 5.3% 2.1% 2.5% 0.3% 0.1% 1.7% 6.7% Loan Portfolio Mix 1.4% 1.3% 0.4% 1.2% 0.4% 1.0% 0.4% 0.3% 0.1% 0.02% 0.4% 1.2% *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 FY18 Cumulative past 5 years Solar Lamp 1.0% 5.3% 7.3% 8.4% 9.2% 31.2% Mobile Phone 1.7% 6.1% 9.7% 5.4% 5.8% 28.7% Sewing Machine - - Bicycle Mixer Grinder Others - 1.8% 1.0% 0.5% 3.3% - 1.5% 0.9% 0.1% 2.4% % 1.4% 1.4% 0.2% 1.1% 0.1% 0.03% 1.5% Total 2.7% 11.7% 21.3% 15.8% 17.0% 68.5% Frequency of Loans Based On Current Member Base Frequency of Loans (for the period) FY14 FY15 FY16 FY17 FY18 Cumulative past 5 years #1 1.8% 6.2% 10.8% 11.5% 20.2% 30.4% #2 0.1% 0.6% 1.5% 0.6% 2.2% 8.4% # % - 0.2% 2.7% # % # % Total 1.9% 6.7% 12.4% 12.1% 22.6% 42.9% Cumulative Cross-sell Penetration % among our existing Non-AP Member base of 7.3 mn for last 5 years is 42.9% 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 Q4FY18 Interest Yielding^ Non Interest Yielding^^ ,150 1,606 1, Total ,428 1,941 1,938 1,302 1,043 1,108 ^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? 30% for FY18 Sangam managers who earn lesser average monthly performance incentive i.e. ~Rs. 3,800 vis-à-vis ~Rs. 8,400 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 FY18 Member Services %Mix < 6 Months 31% 6 Months - 1 Yr. 24% 1-2 Yrs. 29% 2-3 Yrs. 7% > 3 Yrs. 8% Avg. Vintage (Yrs.) As on Mar-18 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.17,500 pm) in the local milieu (1 st Govt. Job) High growth career path No lateral recruitments till 4 levels above loan officer. Senior Management 9.3 Middle Management 9.5 Branch Management* 7.6 Sangam Managers 2.5 (3.4^) ^ Avg Vintage of Sangam Managers (Excl. who joined in last one year) i.e. 67% 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 - 94% Income generation loans 98% 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. 80,000# Tenure If loan amt. > Rs.30,000, then >= 24 months Collateral Without collateral Repayment Model Weekly, Fortnightly and Monthly # With effective from Q1FY19 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: 7.9% for FY18 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 Q4FY18 is 9.8%, Hence Avg. interest rate of loans sanctioned in Q1FY19 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 56% 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 Scope 224 strong headcount ISO 9001:2015 certified process All branches are inspected monthly based on a 4 tier grading system Top 25 disbursement branches are audited twice in a month incentives/appraisals of field staff linked to branch grading Internal Audit of branches fully automated Branches 1,567 Branches per Internal Audit staff 7 Regional Offices 37 Pre Post Benefits MS-Excel Offline audit & control 7 branches per IA staff Automation of Internal Audit Automated risk based audit Real time control for Managers 8 branches per IA staff by FY19 Improved Audit quality Improved Audit supervision Efficiency gains Scope of Audit Audit area IGL Branches Frequency Client Acquis ition Center Meeting Process Document verification (KYC, Loan utilization check etc.) Monitoring process by supervisors Adherence to Process / Policies Statutory Requirements (Credit bureau, Fair practices etc.) Client Visits * High Risk items (Frauds etc.) Fixed Assets verification^ Monthly Regional Offices Quarterly Head office Quarterly Note: * Approximately 25% 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