#1Bajaj Housing Finance Limited Debt Investor Presentation Q4FY23 B BAJAJ FINSERV#2AGENDA 01 Executive Summary 02 Financial & Credit Quality Highlights 03 Portfolio & Treasury Update 04 Key Drivers 05 Business Wise Update 06 Way Forward B BAJAJ FINSERV#3Executive Summary B BAJAJ FINSERV#4Company Overview 3,009 Cr 69,228 Cr 2,788 161 B BAJAJ FINSERV Monthly Acquisition (as of March 23) Bajaj Housing Finance Ltd. (BHFL): Asset Under Management (as of Mar 31, 2023) Employees Locations (Urban-52; Rural-109) is registered with National Housing Bank (NHB) as a Housing Finance Company (HFC), regulated by the Reserve Bank of India (RBI). The RBI through its press release dated 30 Sept 2022, has categorised the Company as “Upper Layer NBFC" (NBFC-UL) under the Scale Based Regulations is a 100% subsidiary of Bajaj Finance Ltd. (BFL) - a Bajaj Finserv Group Company started full-fledged operations from January 2018 with dedicated sales, operations, collections, branch & IT infrastructure. The Company operates as a completely independent entity with no common linkages with parent company has completed 6 years of operations and has been profitable since inception - the Company delivered PAT of 12 Cr in FY18, 104 Cr in FY19, 421 Cr in FY20, 453 Cr in FY21, 710 Cr in FY22 and 1,258 Cr in FY23 4#5Financial Snapshot for Q4FY23 Assets Under Management 69,228 Q4FY22 53,322 Total Income 1,585 Q4FY22 30% 1,058 Profit Before Tax 407 Q4FY22 267 GNPA 50% Profit After Tax 302 Q4FY22 52% 198 B BAJAJ FINSERV Net Interest Income * in Crore Q4FY22 452 53% Q4FY22 6,741 631 Net Worth 10,503 NNPA CRAR 22.97% 0.22% 0.08% 40% 56% 5#6Business Update BAJAJ B FINSERV The AUM of the Company grew 30% at 69,228 Cr as of 31 March 2023 as against 53,322 Cr as of 31 March 2022. Home Loans AUM grew by 24%, Loan against property by 4%, LRD by 64% and Developer Finance by 92%. AR grew by 34% at 62,114 Cr as of 31 March 2023 as against 46,482 Cr as of 31 March 2022. The Company had a better quarter on the acquisition front disbursing 9,026 Cr during Q4FY23 as against 7,463 Cr of Q4FY22, a growth of 21% Y-o-Y. The Company delivered profit after tax of 302 Cr in Q4FY23 as against 198 Cr in Q4FY22; a growth of 53%. With 250 bps policy rate interventions by the RBI through the year, cost of funds for the Company also witnessed an upward trajectory. Cost of funds for Q4FY23 stood at 7.48% as against 7.12% in Q3FY23. The Company continued to carry sufficient liquidity buffer during the quarter and ending at 2,110 Cr as of 31 March 2023. Capital adequacy remained comfortable at 22.97% as of 31 March 2023 with Tier -1 capital at 22.19%. Borrowings mix stood at 52% : 3% : 32% : 12% : 1% between Banks : NHB : Money market: Assignment: ICD as of 31 March 2023. 6#7Business Update ☐ In Q4, liquidity coverage ratio remains comfortable at 129.12%, above regulatory requirement of 60%. Opex to NII improved to 26.5% in Q4FY23 as against 32.5% in Q4FY22. B BAJAJ FINSERV ☐ ☐ GNPA at 0.22% as of 31 March 2023 (0.31% as of 31 March 2022) as against 0.23% as of 31 December 2022, an improvement of 1 bps. NNPA also improved by 2 bps at 0.08% as of 31 March 2023. Provisioning coverage ratio at 64%. Loan losses and provisions for the quarter were 57 Cr as against 38 crore in Q4FY22. The Company continue to hold management overlay provision of 237 Cr as of 31 March 2023. Overall stage 2 assets stood at 360 Cr as of 31 March 2023 as against 394 Cr as of 31 December 2022. Of this, non overdue (O DPD) one-time resolution (OTR) assets classified as stage 2 as of 31 March 2023 were 123 Cr where the Company carries provisioning of 20% as against the regulatory requirement of 10%. Overall stage 3 assets stood at 137 crore as of 31 March 2023 as against 135 crore as of 31 December 2022. 7#8Financial & Credit Quality Highlights B BAJAJ FINSERV#9Financials BAJAJ B FINSERV in Crore Financials snapshot Q4 FY23 Q4 FY22 Y-o-Y FY23 FY22 Y-o-Y Assets under management 69,228 53,322 30% 69,228 53,322 30% Assets under finance 62,114 46,482 34% 62,114 46,482 34% Interest income Fee and other income Total Income Interest expenses Net Interest Income Operating Expenses Loan losses and provisions 1,520 961 58% 5,269 3,482 51% I 65 97 -27% 396 285 39% 1,585 1,058 50% 5,665 3,767 50% 954 606 57% 3,211 2,155 49% 631 452 40% 2,454 1,612 52% 167 147 14% I 630 471 34% 57 38 50% 124 181 (31%) 407 302 Profit before tax Profit after tax Key Ratios: Operating expenses to Net Interest Income 26.5% 32.5% 25.7% 29.2% Loan loss to average AR* 0.38% 0.34% 0.23% 0.45% Return on Average Assets* 2.01% 1.76% 2.32% 1.78% Return on Average Equity * 11.67% 11.92% I 14.59% 11.12% 267 52% 1,700 960 77% 198 53% 1,258 710 77% I * annualized#10ECL Summary B BAJAJ FINSERV Asset categorization Mar'22 Jun'22 Sep'22 Dec'22 Mar'23 Stage 1 & 2 (represents standard assets) 99.69% 99.73% 99.76% 99.77% 99.78% Stage 3 (represents GNPA) 0.31% 0.27% 0.24% 0.23% 0.22% Summary of stage wise assets and provision for impairment allowance in Crore Assets and impairment allowance Mar'22 Jun'22 Sep'22 Dec'22 Mar'23 Gross Stage 1 & 2 assets* (A) 46,803 50,370 55,286 58,346 62,502 ECL Provision Stage 1 & 2 (B) 388 388 407 416 438 Net Stage 1 & 2 assets (C = A-B) 46,415 49,983 54,878 57,930 62,064 ECL Provision% Stage 1 & 2 assets (D = B/A) 0.83% 0.77% 0.74% 0.71% 0.70% Gross Stage 3 assets@ (E) 146.4 134.5 131.2 134.6 137.3 ECL Provision Stage 3 (F) 79.5 78.2 70.9 73.6 87.3 Net Stage 3 assets (G = E-F) 66.9 56.3 60.3 61.1 50.0 Coverage Ratio % Stage 3 assets (H= F/E) 54% 58% 54% 55% 64% ECL/Total Assets 1.00% 0.92% 0.86% 0.84% 0.84% *Gross stage 1 & 2 assets represent loans balance as per Ind AS after adjusting for the impact of amortization of fees earned and acquisition cost incurred. @ Gross Stage 3 assets represents loans balance as per Ind AS after adjusting for the impact of (i) amortization 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. 10 10#11Portfolio performance - Provisioning Coverage B BAJAJ FINSERV NNPA % * in Crore AUM PCR GNPA % Particulars 31 Mar 23 GNPA NNPA (%) 31 Mar 22 31 Dec 22 31 Mar 23 31 Mar 22 31 Dec 22 31 Mar 23 Home Loans 41,037 76 27 65% 0.27% 0.19% 0.20% 0.12% 0.08% 0.07% Loan against property 6,538 29 12 59% 0.65% 0.59% 0.56% 0.33% 0.33% 0.23% Lease rental discounting 11,260 Developer Finance 6,026 I Rural Mortgages 2,592 23 9 62% 1.22% 1.30% 1.15% 0.59% 0.52% 0.43% Other loans 1,775 9 3 70% 0.41% 0.47% 0.50% 0.13% 0.15% 0.15% Total 69,228 137 50 64% 0.31% 0.23% 0.22% 0.14% 0.10% 0.08% 11#12Stagewise ECL provisioning BAJAJ B FINSERV Gross Assets Receivable ECL Provision PCR % Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Home Loans 37,663 185 76 189 41 49 0.5% 22.4% 64.8% Loan against property 5,000 94 29 36 19 17 0.7% 20.1% 58.7% Lease rental discounting 9,684 I 62 I 0.6% Developer Finance 6,066 7 0 46 2 0 0.8% 25.7% 0.0% Rural Mortgages 1,950 62 23 12 13 15 0.6% 20.7% 63.1% Other loans 1,779 12 9 15 3 6 0.8% 27.4% 70.3% Total as of 31 March 2023 62,142 360* 137 360 78^ 87 0.6% 21.8% 63.6% Total as of 31 Dec 2022 57,952 394 135 333 83 74 0.6% 21.1% 54.6% Total as of 31 Mar 2022 46,200 604 146 260 128 79 0.6% 21.2% 54.3% 12#13●●●Portfolio & Treasury Update B BAJAJ FINSERV#14BHFL Portfolio View 16% 9% 9% 4% 2% Portfolio Mix Rs. 69,228 crore 11% 49% Home loan incl. top up: Rs. 41,037 crore (59%) Home Loan HL Top Up LAP LRD DF Rural Others A well diversified portfolio with dominant share of HL 5% 5% Home Loan Portfolio Customer Categorisation Rs. 35,007 crore* Salaried Professionals 90% B ■Self-Employed BAJAJ FINSERV Focus on low-risk, fast growing Salaried Home Loan customer *Represents home loans portfolio excl. Top ups & incl. rural home loans 14#15Treasury Strategy - Fund Raising Mix 32% 3% 0.3% 12% B BAJAJ FINSERV Money market liquidity to support growth over 15-18 months 52% Continued focus on longer tenor borrowings. Rebalancing borrowing with higher money market mix Maturity of book to open avenues for sub- debt and NCD borrowing supporting ALM NHB refinance to diversify borrowings and support ALM mismatch Assignments to drive balance sheet growth and address ALM mismatch 1% Term Loans CP NCD NHB ICD Assignment March 2023 15#16Behaviouralized ALM snapshot (as of 31 Mar 2023) B BAJAJ FINSERV * in Crore 1-7 D 8-14 D 15-30 D >1-2 M >2-3 M >3-6 M >6 M-1 Y >1-3 Y >3-5 Y >5 Y Total Cash & Investments 457 215 25 99 699 599 15 2,110 Advances 714 413 647 1,358 1,304 3,715 6,478 17,820 10,340 19,326 62,114 Other inflows 1,058 679 937 767 4,233 4,226 1,756 6,608 20,266 Total Inflows (A) 1,171 628 1,730 2,137 2,241 5,181 11,309 Cumulative Total Inflows (B) 1,171 1,799 3,529 5,665 7,907 13,088 24,398 22,061 46,459 12,096 25,935 84,489 58,555 84,489 Borrowings 18 501 199 1,426 3,167 6,782 20,416 14,261 Capital Reserves and Surplus 6,976 10,503 10,503 53,745 Other Outflows 1,025 550 1,082 945 728 Total Outflows (C) 1,042 550 1,583 1,144 2,154 Cumulative Total Outflows (D) 1,042 1,592 3,175 4,319 6,473 1,540 4,707 11,180 4,091 5,720 10,873 26,136 22,053 48,190 63,002 551 14,812 4,009 21,488 84,489 20,241 84,489 Mismatch (E = A - C) 129 78 147 993 87 474 436 Cumulative mismatch (F = B-D) 129 207 354 1,346 1,434 1,908 2,344 Cumulative mismatch as % (F/D) 12% 13% 11% 31% 22% 17% 11% (4,076) (2,716) 4,447 (1,731) (4,447) 0 (4%) (7%) 0% Permissible cumulative gap % Additional borrowings possible -10% -10% -20% 1,233 1155 16#17Key Drivers B BAJAJ FINSERV#18BHFL Core Strategy ☐ ☐ TOP 4 MORTGAGE ORIGINATOR BUILD A LOW-RISK BUSINESS MODEL In 5 years of operations, BHFL ranks among top 7 mortgage (top 3 HFC) originators in India Aim to be amongst the top 4 mortgage originators in the country To create a low-risk sustainable balance sheet delivering GNPA in corridor of 0.6%- 0.8% and ROE of 13-15% Focus largely on salaried home loan opportunity B BAJAJ FINSERV FOCUS ON CROSS SELL ☐ 69.1 Mn customer base of BFL 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 INCOME 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 ■ Launched affordable housing vertical 18#19BHFL Strengths B ++ (%)+ 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 CAPITAL 2,500 Cr capital infused in FY23 taking total infusion to 7,550 Cr till date with Net worth in excess of 10,500 Cr. Mortgages remain strategic to the group CUSTOMER BASE 83 ANALYTICS ORIENTATION $ COMMITTED LINE Ex BAJAJ B FINSERV CREDIT RATING BHFL has a committed credit line from BFL available on tap Agency Long- term Short- term CRISIL AAA (Stable) A1+ India Ratings IND AAA (Stable) A1+ FULL PRODUCT SUITE DEBT MANAGEMENT BHFL has access to the vast customer base of BFL (69.1 Mn) to cross sell mortgages BHFL mines the vast customer base for eligibility & offer computation through highly sophisticated analytical models Mortgage products for Retail as well as Commercial customers with customized VAS products & services for cross sell/up sell Dedicated and well-staffed Debt Management unit for both urban and rural markets 19 19#20Strong Underwriting & Debt Management Capabilities Retail Loans Underwriting (Home Loans & Loan Against Property) Commercial Loans Underwriting ■ ■ (Developer Finance & ■ Lease Rental Discounting) Debt Management Approach ☐ ☐ B BAJAJ FINSERV Separate dedicated underwriting structures for salaried and self-employed loans 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 ■ 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 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 focused on SARFAESI wherever needed ■ Dedicated team in place for efficient resolution of legal cases at different stages 20 0#21BHFL Product Suite Developer Finance B BAJAJ FINSERV ☑ VAS Products 信 Lease Rental Discounting A Rural Mortgages Home Loans Loan Against Property Full suite of mortgages products and services for retail and corporate customers 21#22Business Wise Update B BAJAJ FINSERV#23Home Loans 39% 41,037 Cr Asset Under Management of Monthly Acquisition Mix 41% Existing Customer base sourcing (for Q4FY23) 90% Salaried Home Loan 59% 70% 12.9 Lakhs FOIR LTV at origination Avg. Customer salary B BAJAJ FINSERV 77% Customers with 750+ CIBIL 50 Lakhs Avg. Ticket Size 23 23#24Home Loans Verticals B B2C 48% 阻 10% Contribution B2B 5 7-8 Markets Appx. 45-50% customers are having prior relationship with Bajaj Data-analytics based offer generation approach for better risk management Customer sourcing on digital channels across Bajaj Finserv assets Micro-Market approach basis customer spread 4-5 Years La Дос Years Behaviouralized maturity of loan B BAJAJ FINSERV 52% BHFL caters to majorly Elite, A+, A category developers Behaviouralized maturity of loan Higher profitability in B2C channel driven by ability to cross-sell Combination of field and regional underwriting processes for balancing TAT and Risk Continue to leverage the vast existing customer base to grow and expand distribution network as an additional 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 24#25Loan Against Property 6,538 Cr Asset Under Management 47% Existing Customer mix BAJAJ B FINSERV 55% LTV at Origination Operative in 29 locations with average ticket size of 72 lakhs. Focused on mass affluent and above salaried and self-employed customers Continued focused on direct to customer strategy along with expansion of intermediary business AUM mix is 28% from salaried, 13% from self-employed professionals and 59% from self-employed Business focused on Fresh LAP with faster turn-around-time of 72-120 hours Self occupied residential property (SORP) constitutes 69% of the total book. Max LTV exposure restricted at 75%#26Rural Mortgages 2,592 Cr 17 L Asset Under Management Average Ticket Size BAJAJ B FINSERV 109 Locations Hub and spoke model with presence across 109 upcountry locations as HUB and 193 locations as Spoke through ASSC tie-ups Average Home Loan LTV of 62% and average Loan against Property LTV of 44% 64% of portfolio is HL and 36% is LAP; continue to focus on increasing the Home loan mix Highest standards of controllership across all products supported by adequate spread 26 6#27Lease Rental Discounting B BAJAJ FINSERV 11,260 Cr 51 Cr Top 12 Asset Under Management Average Ticket Size Locations Offers lease rental discounting to high net-worth individuals (HNI) and developers primarily 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%) All 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#28Developer Finance 6,026 Cr Asset Under Management 307 Active Developers B BAJAJ FINSERV 30 Cr Average Ticket Size 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 13 locations (not operational in Delhi & NCR) Focus on converting DF exposure to retail low risk HL exposures and CCF exposure to lease rental discounting ☐ ☐ Developer Profile Developer should have built minimum 0.75 - 1 million sq. ft. in past 7-10 years Developer not to have more than 3-4 live projects Low leverage Developer should be large in the concerned micro-market ☐ Operating Model Centralized underwriting Disbursal only after RERA and Building approvals Deferred disbursement basis stage of construction and sales milestones Interest servicing mandatory to be done on a monthly basis with no moratorium 28#29Way Forward B BAJAJ FINSERV#30BHFL Way Forward 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 (12-14% 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 $$ Capital adequacy Maintain CRAR of over >17% against regulatory norm of 15% B BAJAJ FINSERV Profitability & Risk metrics ROE: 13-15% ☐ ROA: 1.7%-2.0% GNPA: 0.6%-0.8% ** Operating efficiency ☐ Continued focus towards OPEX management through cost out & process efficiencies Diversified Borrowings Maintain optimal borrowing mix of bank lines and money market with focus on increasing money market borrowings Diversified borrowing mix by availing NHB refinance in FY23 Assignment -15-20% 30 30#31Thank You B BAJAJ FINSERV#32Disclaimer 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 themselves 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. 32 32#33Glossary of terms Term OTR ATS AUM AUF ECL COF GNPA VAS FOIR LTV B2C B2B SENP SEP PD CAR ROA ROE ECB LCR Full form One time Restructuring Average Ticket Size Assets under Management Assets under Finance Expected Credit Loss 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 Capital adequacy ratio Return on average assets Return on average equity External commercial borrowing Liquidity coverage ratio B BAJAJ FINSERV 33