#1●●● Bajaj Housing Finance Limited Debt Investors Presentation Q4 FY21 B BAJAJ FINSERV#2Bajaj Housing Finance Ltd. B 2,150 Cr 38,871 Cr 2348 125 Monthly Acquisition (as of March, 2021) Asset Under Management (as of Mar 31, 2021) Employees Locations (Urban-32; Rural-93) Bajaj Housing Finance Ltd. (BHFL) is registered with National Housing Bank (NHB) as a Housing Finance Company (HFC) BHFL is a 100% subsidiary of Bajaj Finance Ltd. (BFL) - a Bajaj Finserv Group Company BFL has been in the mortgage business since 2008 BHFL has been carved out as HFC to conduct mortgages businesses for the group with dedicated focus BHFL started its full fledged operations from January 2018 with dedicated sales, operations, collections, branch & IT infrastructure BAJAJ FINSERV 2#3Bajaj Housing Finance Ltd. Independent Board Dedicated Functional Units Dedicated Infrastructure Separate and independent Board Committees Dedicated Sales, Credit, Risk, Ops, Collections, IT, Finance, HR and other support functions Dedicated infrastructure in terms of separate Head office, branches and IT infrastructure A standalone, fully functional and operational legal entity B BAJAJ FINSERV 3#4Business Update B BAJAJ FINSERV In Financial Year 2021, the company maintained cautious approach on disbursals in the first half of the year and came back to growth stance from Q3. H2 disbursals were higher YOY but full year disbursals were short by 24% due to H1 impact. AUM growth for the year ended 31st March'21, was 19% Y-o-Y; subdued due to continued portfolio attrition pressure in H2 driven by reduced benchmark rates by banks and hyper competitive pressures. Profits for the year went up by 8% despite much higher cautionary provisions taken for Covid impact. Covid second wave in April will mean some impact on Q1 disbursals numbers, as large markets have gone into lockdown. However, assuming lockdown is intermittent and not national, the company expects to deliver normal growth in current year. In event of national lockdown or extended second wave, company may see impact on acquisitions. Bounce rates across portfolio barring Rural have marginally come down since the last quarter and stood at 4.34%, against 3.16% pre-Pandemic. 4#5Business Update B BAJAJ FINSERV GNPA and NNPA stood at 0.35% and 0.22 % as on 31st March'21. In addition, company had a One-time restructured pool (as per RBI guidelines) of 1.53% of book. The same has been classified as Stage-2 in books due to elevated risk and company has adequately provided for in the portfolio for any future contingency arising out of the OTR pool. Company has a management overlay of Rs 166 crores as on March 21, besides higher provision on OTR pool to meet any unforeseen eventuality from Covid impact on portfolio. The incremental cost of borrowings for company has come down significantly in Q3 and Q4 for the company and with repricing of existing lines. Overall cost of funds have come down significantly enabling company to compete on pricing in market. Company continued to maintain higher liquidity in March end in view of second Covid wave. Commercial portfolios of the company i.e., Developer Finance and Lease Rental Discounting have demonstrated immaculate portfolio performance in pandemic 5#6Business wise Moratorium & Restructuring Summary B BAJAJ FINSERV Business AUM Mar'21 Current bucket 30+ (%) (%) Mar 21 Mar'21 OTR (%) till 31 Marʼ21 Bounce Rate Mar'21 in Crore Bounce Rate (Mar'20-Pre Covid) HL 23943 99.59% 0.32% 1.95% 3.36% 2.36% LAP 4753 99.36% 0.46% 1.33% 6.38% 4.52% LRD 4838 99.96% 0.00% 0.00% ΝΑ ΝΑ DF 2057 99.45% 0.55% 0.00% ΝΑ ΝΑ Rural 1980 98.78% 0.76% 2.34% 11.75% 7.67% Others 1300 99.61% 0.24% 1.37% 4.01% 2.97% Total 38,871 99.56% 0.33% 1.53% 4.34% 3.16% 6#7Financials B BAJAJ FINSERV in Crore Financials snapshot Assets under management Q4 FY21 Q4 FY20 Yo Y FY21 FY20 Yo Y 38,871 32,705 19% 38,871 32,705 19% Assets under finance 33,419 27,975 19% 33,419 27.975 19% Interest income 743 687 8% 2,877 2,303 25% Fee and other income 88 58 52% 218 269 (19%) Net gain on fair value changes on Investments 9 29 (69%) 60 74 (19%) Total Income 840 774 9% 3,155 2,646 19% Interest expenses 471 491 (4%) 1,966 1,616 22% Net Interest Income 369 283 30% 1,189 1,030 15% Operating Expenses 98 72 36% 329 339 (3%) Loan losses and provisions 30 89 (66%) 247 124 99% ECL stage 1 & 2 19 69 (72%) 199 86 131% ECL stage 3 & write off 11 20 (45%) 48 38 26% Profit before tax 241 122 98% 613 567 8% Profit after tax 179 91 97% 453 421 8% Ratios Operating expense to Net Interest Income 26.6% 25.4% 27.7% 32.9% Loan loss to Average AUF* 0.09% 0.33% 0.80% 0.55% Return on Average Assets* 0.6% 0.3% 1.5% 1.9% Return on Average Equity* * Not annualized 3.0% 1.9% 7.8% 9.1% 7#8Behaviouralized ALM snapshot (as of 31 Mar'21) B BAJAJ FINSERV in Crore Particulars Cash & Investments Advances 1D 7D 7D-14D 15D 30D >1-2M >2-3M >3 6M >6M 1Y >1Y-3Y >3Y-5Y >5Y-7Y >7Y-10 Y > 10 Y Total 2,969 255 759 0 3,983 397 173 404 763 738 Other inflows 77 77 826 1,507 1,258 1,024 Total Inflows (A) 3,443 505 1,231 3,029 1,996 3,116 2,092 3,717 224 3,941 10,466 6,082 3,688 2,925 1,974 33,419 834 11,300 967 349 236 791 8,168 Cumulative Total Inflows (B) 3,443 3,947 5,178 8,207 10,203 13,319 17,260 7,049 28,559 35,60 8 39,644 4,036 3,161 2,765 45,570 42,805 45,570 Borrowings 1,291 664 1,886 1,466 1,450 4,476 14,168 5,861 1,904 1,799 34,965 Capital Reserves and Surplus 6.032 6,032 Other Outflows 287 277 550 292 171 441 29 Total Outflows (C) 1.578 277 1,214 2,178 1,637 1,891 Cumulative Total Outflows (D) 1,578 1,855 3,069 5,247 6,884 8,776 13,280 9 4,505 14,177 5,872 27,458 33,330 35,236 11 3 2,500 2 4,573 1,906 2,500 7,834 45,570 37,736 45,570 Mismatch (E = A - C) 1,865 228 16 851 358 Cumulative mismatch (F = B-D) 1,865 2,093 2,109 2,960 3,319 4,543 3,979 1,224 (564) (2,877) 1,102 1,176 2,130 2,278 4.408 5,069 661 (5,069) Cumulative mismatch as % (F/D) 118% 113% 69% 56% 48% 52% 30% 4% 7% 13% 13% 0% Permissible cumulative gap % -10% -10% -20% Additional borrowings possible ■ 3,397 -15% 3,629 As per previous GAAP 8#9ECL Summary BAJAJ B FINSERV ECL categorization Mar'20 Jun'20 Sept'20 Dec'20 Mar'21 Stage 1 & 2 (represents standard assets) 99.92% 99.92% 99.91% 99.65% 99.65% Stage 3 (represents GNPA) 0.08% 0.08% 0.08% 0.06% 0.35% Stage 3 (not classified as NPA) 0.01% 0.29% Summary of stage wise assets and ECL provisioning in Crore Financial Assets & ECL provision Mar/20 Jun'20 Sept 20 Dec'20 Mar'21 Gross Stage 1 & 2 assets* (A) 28,199 28,739 29,601 31,356 34,000 ECL Provision Stage 1 & 2 (B) 112 156 220 291 310 Net Stage 1 & 2 assets (C = A-B) 28,088 28,582 29,381 31,065 33,690 ECL Provision % Stage 1 & 2 assets (D = B/A) 0.40% 0.54% 0.74% 0.93% 0.91% Gross Stage 3 assets® (E) 23.7 24.1 26.9 110.2 119.1 ECL Provision Stage 3 (F) 9.0 9.3 10.1 41.3 45.2 Net Stage 3 assets (G = E-F) 14.7 14.8 16.8 68.9 73.9 Coverage Ratio % Stage 3 assets (H= F/ E) 38% 38% 38% 38% 38% ECL/ Total Assets 0.43% 0.58% 0.78% 1.06% 1.04% * Gross stage 1 & 2 assets represent loans balance as per Ind AS after adjusting for the impact of am ortisation of fees earned and acquisition cost incurred including other assets like security deposits, receivable from related parties, capital advances etc @Gross Stage 3 assets represents Loans balance as per Ind AS after adjusting for the impact of (i) amortisation of fees earned and acquisition cost incurred and (ii) overdue interest considered recoverable under Ind AS and other receivables considered as non-performing as at the end of respective periods. 9#102.5% Spread 27% BHFL Key Ratios (Q4 FY21) B 9.0% 0.35% GNPA 6.5% COF Yield 2.2% BAJAJ FINSERV 12.0% 21.33% Capital Adequacy OPEX / NIM ROA ROE Target OPEX/NIM of <20% and ROE of 13-15% 10#1113% 12% 3% 5% 5% Portfolio Mix Rs. 38,871 crore 62% BHFL Portfolio View I Home Loan I LAP LRD IDF Rural Others I Salaried A well diversified portfolio with dominant share of HL 5% 5% Home Loan Portfolio Customer Categorisation Rs. 24,986 crore 90% B Professionals Self-Employed Focus on low-risk, fast growing Salaried Home Loan customer BAJAJ FINSERV 11#1223% 8% 15% GP ■Term Loans ■CP Treasury Strategy - Borrowing Mix ■NCD Assignment March 2021 B BAJAJ FINSERV 54% Money market liquidity to support growth over 15-18 months Rebalancing borrowing with higher money market mix Maturity of book to open avenues for sub-debt and NCD borrowing supporting ALM Open NHB refinance for helping in diversification of borrowings Assignments to drive balance sheet growth and address ALM mismatch To add new brick of sub-debt, refinance as balance sheet matures and play aggressively on assignment 12#13TOP 4 MORTGAGE ORIGINATOR BHFL Core Strategy BUILD A LOW RISK BUSINESS MODEL In 3 years of operations, BHFL ranks among top 7 mortgage originators in India Aim to be amongst the top 4 mortgage originators in the country To create a low risk sustainable balance sheet delivering <0.75% GNPA & 13-15% ROE Focus largely on salaried home loan opportunity ☐ ☐ B BAJAJ FINSERV FOCUS ON CROSS SELL 48 Mn+ customer base 12 Lakh Cr mortgage opportunity available. Focus on customer data enrichment to create right propositions Lower risk DIVERSIFIED HL FOCUSED BUSINESS MIX ☐ ☐ ☐ Entire suite of products available to meet customer mortgage requirements Home loans to contribute 60% -65% of portfolio Risk based business mix to ensure low risk portfolio contribution ☐ FOCUS ON FEE IN COME Mortgage is a highly competitive & low margin business with minimal pricing width available Focus on cross-sell income through cross- selling up-selling customized VAS products & services FOCUS ON MASS AFFLUENT(+) CLIENTS ☐ Focus on mass affluent and above customer segment Average age of 35-40 years and average salary of 10-20 lakhs 13#14B BRAND NAME Bajaj group is one of the most reputed & vintage groups in the country. Bajaj Finance is a leading financial services name in the industry (%)+ BHFL Strengths CAPITAL $ COMMITTED LINE Ex CREDIT RATING B BAJAJ FINSERV BFL has infused 5,050 Cr till date and is committed to grow Mortgages Agency Long-term Short-term BHFL has a committed credit line from BFL available on tap CRISIL AAA (Stable) A 1+ India Ratings IND AAA (Stable) A 1+ CUSTOMER BASE BHFL has access to the vast customer base of BFL (48 Mn+) to cross sell mortgages 88 ANALYTICS ORIENTATION BHFL mines the vast customer base for eligibility & offer computation through highly sophisticated analytical models FULL PRODUCT SUITE Mortgage products for Retail as well as Commercial customers with customized VAS products & services for cross sell / up- sell DEBT MANAGEMENT Dedicated and well-staffed Debt Management unit for both urban and rural markets 14#15VAS Products Rural Mortgages BHFL Product Suite B BAJAJ FINSERV s Home Loans Loan Against Property Lease Rental Discounting IIIII Developer Finance Full suite of mortgages products and services for retail and commercial customers 15#16Home Loans 23,943 Cr Asset Under Management 57% of Monthly Acquisition Mix (for Q4 FY21) 92% Salaried Home Loan B BAJAJ FINSERV 58% 59% 70% 12 Lakh 81% 45 Lakh Existing Customer base sourcing FOIR Avg. Customer salary Customers with 750+ CIBIL Avg. Ticket Size LTV at origination 39% of the Company's incremental AUM for the quarter is contributed by HL to salaried individuals... 16#17B2C Home Loans Verticals B BAJAJ FINSERV 69% B2B 31% 15% Contribution 5 7-8 B 雨 Appx. 67-70% customers are having prior relationship with Bajaj Data-analytics based offer generation approach for better Customer sourcing on digital channels across Bajaj Finserv assets risk mgmt. Markets Micro-Market approach basis customer spread Years Behaviouralized maturity of loan BHFL caters to majorly Elite A+/A category developers 4-5 Years Behaviouralized maturity of loan La Дос Higher profitability in B2C channel driven by ability to cross-sell 404 Combination of field and regional underwriting processes for balancing TAT and Risk Continue to leverage the 46 Mn+ existing customer base to grow as well as add distribution network as a new funnel Focused on DF funded projects for scale, relationship and risk mitigation Build large array of partners to build scale going ahead Only defined, selected, risk-approved projects allowed for sourcing Focus on the huge market opportunity in B2B to provide exponential growth. Less risky and highly stable portfolio 17#184,753 Cr Asset Under Management Loan Against Property 71% Existing Customer mix B BAJAJ FINSERV 44% LTV at Origination Operative in top 14 cities with ATS of 52 lakhs. Focused on mass affluent and above salaried and self-employed customers Continued focused on direct to custom er strategy with intermediary business contributing to about 66% of new acquisition ATS ranges from 30 lakh to 100 lakh with a cap of 300 lakh. AUM mix is 28% from Salaried, 13% from SEP and 59% from SEN P Business focused on Fresh LAP with faster turn-around-time of 72-120 hours Self occupied residential property (SORP) constitutes 71% of the total book. Max LTV exposure restricted at 75% 18#191,980 Cr Asset Under Management Rural Mortgages 5.6% Spread 93 Locations B BAJAJ FINSERV Hub and spoke model with presence across 78 up country locations as HUB and 50 locations as Spoke thru ASSC tie-ups Only business where company acquires self-employed non-professionals in HL ATS of 17 lakh with average Home Loan LTV of 58% and average Loan against Property LTV of 40% 48% of portfolio is HL and 52% is LAP - targeting 50:50 acquisition mix by Dec 2020 Highest standards of controllership across all products supported by adequate spread 19#20Lease Rental Discounting Business 4,838 Cr Asset Under Management 32 Cr Average Ticket Size B BAJAJ FINSERV Top 8 тор Locations Offers lease rental discounting to high net-worth individuals (HNI) and developers prim arily for leased out office spaces Lessees are majorly Fortune 500 companies. The properties are relatively easier to lease out later as well Conservative discounting and comfortable LTVs (~55%). Loan size ranges from 5 Cr - 200 Cr All the LRD transactions are backed by rentals through ESCROW mechanism with exclusive charge Continuous monitoring of each transaction on a monthly basis by a dedicated risk team structure 20 20#21B BAJAJ FINSERV 2,057 Cr Asset Under Management ■ ☐ Business Approach Focus on building a granular book Focused on end unit price <1 Cr other than Mumbai and <1.5 Cr in Mumbai No land financing Operative in 8 locations (not operational in Delhi & NCR). Focus on converting DF exposure to retail low risk HL exposures Developer Finance ☐ 222 Active Developers Developer Profile Developer should have built minimum 0.75 - 1 million sqft. in past 7-10 yr. Developer should not have more than 2-3 live projects Low leverage Developer should be large in the concerned micro-market 15-35 Cr ☐ ☐ Average Ticket Size Operating Model Centralized underwriting Disbursal only after RERA and Building approvals Deferred disbursement basis stage of construction and sales milestones Principal sweep from Day 1 Interest servicing mandatory to be done on a monthly basis with no moratorium 21#22Strong Underwriting and debt management capabilities B BAJAJ FINSERV Separate dedicated underwriting structures for salaried and self-employed loans Retail Loans Underwriting (Home Loans & Loan Against Property) ☐ Salaried loans follow a hub model while self-employed loans are underwritten across all locations to address business and collateral related nuances Tele-PD for all salaried loans while physical PD with underwriter mandatory for all self-employed loans Legal and technical evaluation of collateral though in-house collateral team and empaneled vendors as per the regulatory norms Checkpoints / hind-sighting processes over the life-cycle of the loan Commercial Loans Underwriting (Developer Finance & Lease Rental Discounting) Dedicated underwriting structure of subject matter experts with relevant domain experience For LRD transactions: In-depth assessment of customer's borrowing requirement, credit history, financials, market stature, borrowing entity structure, collateral site, credibility of lessee's, lock-in period For DF transactions: detailed assessment of developers history, project site, approvals, cash flows, existing projects performance Use of industry best practices and tools for the preparation of Credit Approval Memo (CAM) for each commercial transaction Centralized disbursal of all commercial transaction for better controllership Debt Management Approach ☐ Dedicated debt management structure for all Retail loans – urban as well as rural Debt management is done through in-house debt management team - no external agencies Backed by a strong legal structure Dedicated team in place for efficient resolution of legal cases at different stages 22#23BHFL Way Forward B BAJAJ FINSERV Profitability & Risk metrics $$ Capital adequacy Maintain CRAR of over >15% over the next 3 years against regulatory norm of 15% ☐ ROE: 13-15% BOO ◉ Optimal Balance Sheet Mix Focus on building a low-risk balance sheet with medium ROE. Salaried HL to be the core growth driver over the next 3-5 years. Developer Finance book to be range bound (7-8% of the portfolio) Granular Portfolio Continue to focus on mass affluent customers as core target segment Continue to focus on ATS of 30 – 100 lakh in retail ☐ 808 ■ Operating efficiency Continued focus towards OPEX ◉ management through cost out & process efficiencies OPEX/NIM -20% by FY23 ROA: 1.8% -2.1% GNPA: <0.75% Diversified Borrowings Maintain optimal borrowing mix of bank lines and money market. Add new lines through refinance, sub- debt and ECB Assignment ~18-20% 23#24Thank You Bajaj Housing Finance Limited B BAJAJ FINSERV#25Disclaimer B BAJAJ FINSERV This presentation has been prepared by and is the sole responsibility of Bajaj Housing Finance Limited referred to as the "Company" or "Bajaj Housing Finance". By accessing this presentation, you are agreeing to be bound by the trailing restrictions. This presentation does not constitute or does not intend to constitute or form part of any offer or invitation or inducement to sell, or any solicitation of any offer or recommendation to purchase, any securities of the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment therefor. In particular, this presentation is not intended to be a prospectus or offer document under the applicable laws of any jurisdiction, including India. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained in this presentation. Such information and opinions are in all events not current after the date of this presentation. There is no obligation to update, modify or amend this communication or to otherwise notify the recipient if information, opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. However, the Company may alter, modify or otherwise change in any manner the content of this presentation, without obligation to notify any person of such change or changes. These materials are being given solely for your information and may not be copied, reproduced or redistributed to any other person in any manner. The distribution of these materials in certain jurisdictions may be restricted by law and persons into whose possession these materials comes should inform them selves about and observe any such restrictions. Certain statements contained in this presentation that are not statements of historical fact constitute "forward-looking statements." You can generally identify forward-looking statements by terminology such as "aim", "anticipate", "believe", "continue", "could", "estimate", "expect", "intend", "may", "objective", "goal", "plan", "potential", "project", "pursue", "shall", "should", "will", "would", or other words or phrases of similar import. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or other projections. Important factors that could cause actual results, performance or achievements to differ materially include, among others: (a) material changes in the regulations governing the Company's businesses; (b) the Company's ability to comply with the capital adequacy norms prescribed by the RBI; (c) decreases in the value of the Company's collateral or delays in enforcing the Company's collateral upon default by borrowers on their obligations to the Company; (d) the Company's ability to control the level of NPAs in the Company's portfolio effectively; (e) internal or external fraud, operational errors, systems malfunctions, or cyber security incidents; (f) volatility in interest rates and other market conditions; and (g) any adverse changes to the Indian economy. This presentation is for general information purposes only, without regard to any specific objectives, financial situations or informational needs of any particular person. The information contained in this presentation is only current as of its date and the Company does not undertake any obligation to update the information as a result of new information, future events or otherwise.#26Glossary of terms Full form One time Restructuring Average Ticket Size Assets under Finance B BAJAJ FINSERV Term OTR ATS AUF ECL Expected Credit Loss COF GNPA VAS FOIR LTV B2C B2B SEN P SEP PD Cost of funds Gross Non Performing Assets Value added products & services Fixed obligation to income ratio Loan to Value Business to Customer Business to Business Self employed Non Professionals Self employed Professionals Personal discussion CAR Capital adequacy ratio ROA Return on average assets ROE Return on average equity ECB External commercial borrowing