Bajaj Finserv Financial Overview

Executive summary - Q1 FY21 BAJAJ B FINSERV USD 1 INR 75 22. During the quarter, the Company has taken an additional contingency provision for COVID-19 of $ 193 MM taking its contingency provision for COVID-19 to $ 313 MM as of 30 June 2020. The contingency provisioning for COVID-19 is now at 10.8% of moratorium book. This contingency provision together with existing ECL provision of $ 83 MM provides an overall provisioning coverage of 13.7% on the consolidated moratorium book. 23. Additionally, as a matter of prudence, the Company has reversed interest income to the tune of $ 29 MM from the interest capitalized during moratorium period. 24. The Company last provided an update on its credit cost scenario model on 6 April 2020. The company considered lockdown of up to 50-days for its various scenario planning. We estimated an 80-90% increase in credit costs ($ 720-760 MM for FY21) assuming lockdown till 15 May 2020. 25. However, the national lockdown continued for 68 consecutive days till 31 May 2020 and it was followed by multiple district / state level lockdowns imposed by respective local authorities. At this juncture, big cities like Bangalore and Pune are in midst of more stringent lockdown than the national lockdown. 26. The Company has now updated its credit cost scenario model for FY21 considering extended disruptions. It now estimates its credit costs to increase by 100-110% ( $ 800-840 MM for FY21) over the pre-COVID credit cost of previous year. The Company has strong pre-provision profitability to absorb increased losses caused by COVID-19. 27. The Company has significantly augmented its collections infrastructure to mitigate its credit costs. It has added 2,800 collections officers and approximately 16,000 collection agency staff to manage the increased bounce volumes caused by COVID-19. 28. At this juncture, based on our assessment, 75+ cities should revert to pre-COVID collection efficiencies by November, 40-75 Cities by end December and 10-40 cities by February. Top 10 cities collection efficiency forecast is tough to predict. All this is of course subject to Government of India not enforcing a 2nd national lockdown. Back 8

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