Transcript of 13th e-AGM held on 21 July 2020 of Limited

BAJAJ FINSERV LIMITED

13th e-AGM Transcript to be read along with the recorded video on Company’s website at https://www.youtube.com/embed/UB1yT-yceLk

Sanjiv Bajaj: Its 4.15. I think it’s time to get started. Good Afternoon! I am , Chairman & Managing Director and I call this meeting to order and announce that the quorum is present at this 13th Annual General Meeting and our first e-AGM of Bajaj Finserv. Our Directors and all of us express profound grief on the sudden demise of Shri Nanoo Pamnani, our erstwhile chairman. He was the architect at and a mentor to many of us, and he will be sorely missed.

We all know we are living through the current pandemic and keeping in mind the continuing restrictions thereof, MCA vide their circular dated 5 May 2020 read with other circulars of 8 April and 13 April has allowed companies to conduct their AGM through Video Conferencing (VC) or Other Audio Visual Means (OAVM). Accordingly, we are holding this meeting in the same manner.

Under regulation 44(6) of SEBI Listing Regulations, 2015, the Company has provided the facility of one-way live webcast of the proceedings of this e-AGM. Members who are entitled to participate in the e-AGM can view the proceedings by logging on to the e-voting website of KFin Technologies. All our Directors, including our Independent Directors and a few other senior members of the Company, including CEOs and CFOs of our seven subsidiaries are present at this meeting by VC. Let me now do a roll call for each of the directors starting with myself.

I'm again, as I said, Sanjiv Bajaj, Chairman & Managing Director of the Company attending the AGM from the registered office in Pune.

May I now request Shri Balaji Rao to do his roll call. Mr. Balaji Rao can you unmute, please? I think he's having some troubles. We'll come back to him and I move to Dr. Gita Piramal.

Dr. Gita Piramal: Yes, this is Gita Piramal. I'm an Independent Director of the Company and attending the AGM from my residence.

Sanjiv Bajaj: Thank you. Naushad.

Naushad Forbes: I'm Naushad Forbes, an Independent Director of the Company. I'm attending the AGM from my residence in Pune and I am also Chair of the Audit Committee and the Risk Management Committee. Thank you.

Sanjiv Bajaj: Anami

Anami Roy: I am Anami Roy, Independent Director attending the AGM from my residence in Pune.

Moderator: Sir, can you please repeat once again, you were on mute.

Madhur Bajaj: Can you see me Sanjiv? this is Madhur Bajaj.

Sanjiv Bajaj: Ya ya, we can hear you now, please go ahead.

Madhur Bajaj: This is Madhur Bajaj, I am a Non-independent Non-executive Director of the Company. There's nobody else in my room. Look forward to the AGM. Thank you.

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Transcript of 13th e-AGM held on 21 July 2020 of Bajaj Finserv Limited

Sanjiv Bajaj: Thank you. Rajiv.

Rajiv Bajaj: I am , Director, attending from , Akurdi.

Sanjiv Bajaj: Manish Kejriwal

Manish Kejriwal: This is Manish Kejriwal, Non-executive Director attending the AGM from my residence in Mumbai.

Sanjiv Bajaj: Ok, do we have Mr. Balaji Rao, again, who is Chairman of the Nomination and Remuneration Committee, Mr. Balaji Rao.

Balaji Rao: This is Balaji Rao attending AGM from my residence. I am Chairman of the Nomination and Remuneration Committee.

Sanjiv Bajaj: Thank You. With that, I would like to announce that the Directors’ Report, the standalone and consolidated financial statements, and the Auditor's Report thereon, the Secretarial Audit Report, Register of Directors and KMP and their shareholdings under section 170 of the Companies Act, 2013, Register of Contracts under section 189 of the Companies Act, 2013 and certificate from Statutory Auditors of the Company certifying that Bajaj Finserv Employee Stock Option Scheme is in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014 and members resolution are available for inspection through electronic mode as prescribed under the MCA circulars.

Now, we know the proxy system has been done away with for this meeting by MCA, however, resolutions under section 113 of the Companies Act, 2013 are allowed for giving authorization to attend and to vote at this meeting. These resolutions under section 113 for authorization to attend and vote in respect of 89,172,968 equity shares have been received representing 56.04% in aggregate of the Company's paid up share capital.

May I move the Notice of the meeting and the Directors’ Report with the consent of members to be taken as read.

Under the Companies Act, 2013 and the secretarial standards, the auditor's report on the standalone and consolidated financial statements and the Secretarial Audit report are to be read only when there are either qualifications or some adverse comments or observations. Since there are no such qualifications, observations or comments in the Auditor's Report and the Secretarial Audit Report, as in the previous year, the said reports will not be read at this meeting.

Our Statutory Auditors, Shri Shrawan Jalan and Vaibhav Gupta, Secretarial Auditor, Shri Shyamprasad Limaye, Cost Auditor, Anagha Moghe are present through VC or OAVM.

Let me give you some highlights for the quarter. As we know, we are in the midst of COVID-19 pandemic and I hope you and your families are keeping safe. The early on in March, realizing the seriousness of this pandemic, announced the support of a ₹ 100 crore towards this and of this, an amount of nearly ₹ 70 crore has already been spent or committed in various areas to upgrade healthcare, both urban and rural in many States, including Maharashtra, Rajasthan, Uttarakhand, in helping with alternate livelihoods in rural communities.

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Transcript of 13th e-AGM held on 21 July 2020 of Bajaj Finserv Limited

More than 40 lakh meals and dry ration has been distributed so far. 10 district and rural hospitals are being upgraded. Pune’s largest COVID care center with 2,800 beds with our support has just opened and over four and a half crore rupees has been spent on thousands of PP equipment which we have distributed. We are also running significant number of COVID awareness and support campaigns in over 500 villages around the country and a massive distribution of homeopathy medicine as an immunity booster was done. Our fight continues against this virus and we will overcome it together.

As a society, we have to balance lives and livelihood. We must all wear mask, must practice safe distancing and good personal hygiene. We hope our authorities ensure adequate testing, contact tracing, and providing care. It is equally important that business must stay open and micro containment strategies must replace local lockdowns. This is going to be a fight for at least the next 9 to 12 months and personal safety and economic growth must continue hand-in-hand.

Coming to the highlights of the first quarter, Bajaj Finserv reports its financials under the new Indian Accounting Standard, except the standalone numbers of the two insurance companies, which the insurance regulators still requires under Indian GAAP. For Q1, for Bajaj Finserv at the consolidated level, our total income rose by 16% to ₹ 14,192 crore. Our consolidated profit after tax grew 44% to ₹ 1,215 crore. In this, as we know our significant subsidiaries, our Bajaj finance, where its consolidated profit after tax fell actually 19% in these times. They just announced their results earlier today to ₹ 962 crore. Our general insurance company reported a profit after tax of ₹ 395 crore, an increase of 88%. And our life insurance company grew it shareholders’ profit after tax by 110% to ₹ 130 Crore. Now, when you look at these numbers, you can see that overall, these are very strong numbers, but I must point out two unusual items in our consolidated profit after tax. One as we know in this, COVID times Bajaj finance has made an additional provision of ₹ 1,450 crores in the first quarter towards possible credit losses due to COVID. On the other hand, the new Indian accounting standards, require our insurance companies to mark to market all their investments and that has resulted well last quarter, it actually resulted in a big drop in the profit, this quarter, it has resulted in a mark-to-market pre-tax gain of ₹ 556 crore, net. If we were to remove both these, then as against the consolidated profit after tax of ₹ 1,215 crore would have still been higher and it would have been ₹ 1,459 crores, so it would have still been a very good quarter in these times. Very quickly, a few other numbers for each of our operating companies, Bajaj finance grew its total income by 14% to ₹ 6,650 crore, gross and net NPA stood at 1.4% and 0.49%. Our capital adequacy is excellent at 26.4%.

The general insurance companies saw de-growth in our top line. So, our gross written premium fell 19% to ₹ 2,289 crore. This was mainly because a large line of business is motor insurance and we know that motor sales, four wheelers, commercial vehicles, and two wheelers were quite low in the first quarter. On the other hand, we had some benefit of a higher insurance in property and health, but overall, the top line was still lower. However, in this period of time, the Company has reported a strong underwriting profit of ₹ 175 crore versus just ₹ 9 crore in the first quarter of the earlier year and our combined ratio, which was 103% last year stands at 97.6% in Q1, which is again very good. Our life insurance company has continued to do well. Our top line again, the gross written premium fell only 7.5% at this time to ₹ 1700 Crore. However, our renewal premiums grew by a healthy 16%.

I'm glad to report that BALIC, our life insurance company's net worth has crossed ₹ 10,000 crore and our AUM ₹ 60,000 crore in this quarter for the first time.

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Transcript of 13th e-AGM held on 21 July 2020 of Bajaj Finserv Limited

Our outlook as a group, however, remains cautious at this point of time, we will focus on risk and profit overgrowth. We will remain liquid by conserving cash, maintain strong capital adequacy, strengthen our collections and renewals, and also use this period to significantly enhance our digitization across our service chain and get leaner in each of our businesses. We are hopeful to come out of this pandemic as a stronger set of companies. I am also happy to share that Bajaj Finserv, which recently got into the Sensex, we had got a couple of quarters ago into the Nifty 50 and on a ten year compounded growth basis has returned to shareholders on market cap 31% versus 5% for the Nifty and the Sensex on a five-year basis, 27% versus about 1% or so. So, we are hopeful that in the medium to long term, we will continue to do well.

Those shareholders desirous of seeing a press release of our consolidated financial results, for the first quarter, after this meeting, will be able to download it from our website.

Let me now take us through the e-voting and the e-AGM resolutions.

The Company in accordance with the Companies Act, 2013 and SEBI Listing Regulations, 2015, has provided a facility to shareholders as on 14 July 2020, that was the cut-off date, to exercise their votes on the items of business given in the Notice through the remote electronic voting system. The e-Voting platform provided by KFin Technologies is being used. The remote e-voting period remained open from 18 July 9:00 AM to 20 July 5:00 PM. The facility is also provided to vote through electronic means at this meeting to those shareholders who have not voted so far, such shareholders may do the e-voting during the meeting as per the procedure already set out in the details in the Notice.

Shri Limaye, a Practising Company Secretary, has been appointed by the Board as Scrutinizer for scrutinizing the e-voting process. Each of the items in the Notice of the e-AGM would be taken up for discussion. After the end of the discussion, the e-voting will be kept open for another 10 minutes during which e-voting can be done by those who have not voted so far, either by remote e-voting or e-voting at the meeting. Members who need technical assistance can contact KFin at either [email protected] or at their helpline 1800-345-4001.

The e-AGM Notice circulated to members by email contains the resolutions for today. But let me very quickly mention these resolutions for you.

Ordinary business:

Item number 1 of the e-AGM Notice - To consider and adopt the standalone and consolidated financial statements of the Company for the financial year ended 31 March 2020 along with the Directors’ Report and the Auditor's Report thereon.

Item number 2 of the Notice- To confirm the interim dividend of ₹ 5 per equity share of face value of ₹ 5 each as the final dividend for the financial year ended 31 March 2020.

Item number 3 - Re-appointment of Shri Rajivnayan Rahulkumar Bajaj, who retires by rotation.

Special business:

Item number 4 of the e-AGM Notice, still an ordinary resolution: Ratification of remuneration of ₹ 60,000 to Dhananjay V Joshi and Associates, Cost Auditor of the Company for the financial year 2020-21, same remuneration as the earlier year.

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Transcript of 13th e-AGM held on 21 July 2020 of Bajaj Finserv Limited

Let me now, open up to invite queries, comments by shareholders on all these items. It’s only the shareholders who have registered themselves as speakers who will be allowed to speak and in the interest of time, a time limit of two minutes has been set, which the moderator will manage.

May I request the speakers to be brief and precise and to avoid repeating questions. Queries, which were received on the specified dates on 18 and 19 July will be taken up subject to the availability of time and will be answered to either by my CFO, Sreeni or myself. For some reason, if we are not able to answer all these queries, then we will email replies within the next three days. So, with this, we would be happy to open up for your queries and comments. I will request the Moderator to take over.

Moderator - Thank you Sir. This is Siddharth and I will be the Moderator for the session. I first request, Mr. Aspi Bhesania to kindly unmute your audio and go ahead with your question. Thank you.

Speaker 1: Chairman Sir, can you see me? Can you see me?

Moderator: Sir, you are audible and visible, sir, please go ahead and speak sir.

Speaker 1: Sir, Quarter 4 profit has reduced mainly due to loss on fair value change. If you remove that thing, then the profit is actually increased, which is a very good sign for which I congratulate you. Sir, we have one segment retail financing, what is the difference between this segment and Bajaj finance? If I want a two-wheeler loan, should I come to you or go to Bajaj finance. Sir, Chairman Emeritus is not visible now, has he not come? Sir, last year and current year we have a negative cash flow, when can we expect it to be positive. In quarterly results, life and general insurance segments are shown separately whereas in the annual results, insurance is shown only as one segment. Front Cover Page of the annual report is blank. Is it possible to advertise your loan products or insurance products or something rather than leaving it blank? Sir, I recommend that you should give some discount on your bikes to shareholders, specially two wheelers, bikes and scooters, if it is possible. Sir, thank you and all the best.

Moderator: Thank you Sir, I now request Mr. Gautam Kedar Prasad Tiwari to kindly unmute your audio and proceed with your question.

Speaker 2: Rajiv Sir, can you listen me, sir?

Moderator: We can hear you. Sir, please proceed with your question.

Speaker 2: Ha, Yes Sir. Sir, I am here Gautam Tiwari and Sir I am very glad to attend your meeting. And this is the first time we are attending through a video conference. And I am very happy that your results are very good. Your secretarial department is Sir very good who has given us the utmost help and very dedicated and hardworking and very sincere…[(bohot hi Honhaar hai jinhone hume bohot ache tarike se guide kiya ki kis tarike se meeting humne join karni hai) (used local language)] for which we are very thankful to you.

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Transcript of 13th e-AGM held on 21 July 2020 of Bajaj Finserv Limited

Sir, aapne jo is bar jo aapne dividend diya hai, wo bahut hee cum hai.. hamarey hisab say..jo aapne dividend..last interim karke pradaan kiya tha (used local language) So can you please do something about it to make sure we get proper dividend. Sir, we are happy that Bajaj Auto se hume utne hi share Bajaj Finserv ke or Bajaj Holding ke bhi mile, for which we are happy. Sanjiv Bajaj Ji, aapke saath mei hamaare relation bohot saalo se hai and from day one, we have been there with you and we have been always supporting you in all that what you have been doing till date and we are very happy that in the process to come we will always be there to support you and do whatever help you want to give you whatever help you want in the days to come. We are very much satisfied and happy with your working. Sir, retail section mei hum aaj kal kya kare and ye pandemic mei (used local language) I would like to have certain queries which I have bought with me. if you permit, we will be happy if you can give some answers to it. Sir, is the Company planning any layoffs of employees now? What is the cost of holding this virtual AGM? Sir, whether there are any new digital initiatives that we have taken by our Company in light of the pandemic lockdown. Sir, how much amount has been contributed to PM cares fund for COVID pandemic and is it a part of CSR spending? Sir, what are the future plans of the Company considering a pandemic situation worldwide. Sir, in such a difficult economic situation, the Company has managed to raise borrowings and how you are managing to raise borrowings and for day to day the expenses and are you maintaining the cost of borrowing? Sir, we would like to know if at all you can answer the question. Sir, how has the Company seen any decline in its business during the lockdown period and if at all there is some decline, how much is the decline and when do we intend to recover it as soon as this is over. Sir, rest all is very good. Good afternoon to all our dignified Board of Directors, our Chairman sir, very dear and popular to the full Bajaj family--- (used local language) and sir we have been a part and (used local language)…Parivaar ke jaise aap logo ne hamesha treat kiya hai, iske liye hum aapke bohot abhaari hai…saalo se ye hum dekh rahe hai ki Bajaj Family how much do you care for your investors, shareholders, stakeholders, and those who are associated with you. You are in here and time and time again. Sir, once again, we thank you and we wish you a really bright future and (used local language)….aapke employees aur staff itne ache hai aur itni achhi services dete hai especially aapke jo secretarial department hai..aapke jo investor department hai..aapke jo human resource department hai..finance department hai..sabki service itni acchi hai aur itne dedicated aur Honhaar hai..) we really thank you for selecting such a good team with you and we are very sure in the days to come..aap hume aise hi achhi service dete rahenge aur ese hi ache shareholders ko rewards dete rahenge aur sir zarur kuchh kijiye..and sir, we would really like to know sir..ki ye pandemic situation puri hone k baad mei hum logo ko jo impact pada hai usko compensate karke aap shareholders ko kis tarike se reward de paenge). I am very sure, you’ll do all the needful that is required to be done in respect of shareholders interest and stakeholders interests, and the days to come, you will be doing much and much better. Thank you very much, sir. And we wish you a very bright and very shining future all the days ahead including our Board of management and the Company and all stakeholders, employees, and everybody those who are connected with you and we are here with you, we will be there with you and we were with you till we breathe our last. This is our assurance and promise. Thank you very much Sir.

Moderator: Thank you sir, with that, the questions from the speaker shareholders are completed. Now, I hand it over back to the Board. Thank you.

Sanjiv Bajaj: Sure. We'll start with my colleague Sreeni answering the question.

S Sreenivasan: Thank you for your questions. I'll take them one by one.

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Transcript of 13th e-AGM held on 21 July 2020 of Bajaj Finserv Limited

The first question was retail financing. What is the difference between auto finance and Bajaj finance.? We are a holding Company, so, we aggregate the results of our material subsidiaries, including Bajaj Finance and the two insurance companies. So, when we disclose the results to the stock exchange, we disclose insurance and finance as two separate businesses. So, basically our retail finance includes all our financing businesses including all the business that is done by Bajaj Finance. This includes consumer lending, or which includes part of which is auto finance. It also includes SME commercial and other lending.

Why cover page is blank? Obviously, if you see the Annual Report, there are quite a lot of advertisements we have already put in. Normally, we leave one-page blank in case people want to make notes. There is no other reason why it should be blank. Coming to the question on dividends, I think as a Holding Company of the three large subsidiaries, each of which is in the business of risk, we ourselves as a Holding Company, hold a small amount of cash in case we need to support them. So, whatever standalone profit we get is what we can distribute. We cannot distribute the consolidated profit. And based on that, we have a dividend policy and we retain some cash for our needs as well as for supporting the businesses and whatever is left we declare as a dividend. If you see last two years, we have actually increased the dividend.

In terms of the pandemic, is the company planning layoffs? As of now, we are not planning any layoffs. The Company and each of our subsidiaries have taken specific steps to reduce costs. In some case we have increased, we have variabilize the cost. Lot of the costs are based on incentives. Bajaj Finance has started a zero-based budgeting exercise to cut out all waste costs that might have been built up over the years in a successful company. Same is true with BAGIC and BALIC, the two insurance companies, we will continue doing that. As of now, we have not taken any decision on any layoffs.

Cost of conducting the virtual AGM, Sonal can you, ( Sonal - ₹ 5 lakh ) it's about ₹ 5 lakh, it’s not a significant cost given the size of our Company and the fact that we can now give access to the AGM to a lot more shareholders in the past when we had physical meetings, we will have to come down to the head office. New digital initiatives, I think one of the lessons that we have learned from the pandemic is that we can do a lot of stuff digitally, which otherwise we were doing physically. During this period, we have been able to engage with our customers directly. All our employees, we were able to provide them with helplines because that was our first priority, employee safety, in terms of helplines with the doctors. We have doctors at call in BAGIC. We also have activated collaboration through virtual software like Microsoft teams. In the process, we have also been able to, for example, hire almost 10,000 agents in each of our insurance companies, including point of sales persons, without even meeting them. So, we had the digital tools available. This was an opportunity for us to activate and make them effective. As we move out of the pandemic at some time the entire learning from this experience will help us offer a lot more digital initiatives to our customers. The focus will be a lot more on enhancing the services to customers.

In terms of the CSR and the contribution, I think Chairman Sanjiv Bajaj had actually mentioned in his opening speech, the Bajaj Group has committed a ₹ 100 crores out of which ₹ 70 crore has been spent on a variety of initiatives and a small part of it will be through the CSR of the companies, but this is different from the philanthropic activities which has done at the family level at the group level. So, this is over and above that.

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Transcript of 13th e-AGM held on 21 July 2020 of Bajaj Finserv Limited

How monies are raised? As you know, in the last, since we had a credit crisis two years ago, after the collapse of a financial institution, money has been difficult in the money markets. However, it also separated the stronger, more well capitalized companies, well managed companies who have not found difficulty in attracting money. Clearly there are risks in the market today in attracting money. Our relative to the market, our companies are AAA rated, especially, Bajaj finance is the only company where we borrow money in our group. We have been able to attract money as we need, however, at the moment, we are very well capitalized. We are on a significant solvency margin. We have sufficient liquidity. We are holding ₹ 20,000 crores in liquidity, apart from a small SLR book that we run off about ₹ 2,500 crores. So, we are not looking to raise more money at this stage.

Then, declining business due to lock down our press release for the first quarter, actually outlines the impacts. We have had lower disbursements in Bajaj Finance. The AUM growth was only 7% in this quarter. The focus for us as of now is not seeking growth, but about risk and profit over growth and managing the whole process with the customer. In terms of general insurance, that has been de-growth in the motor segment. The travel segment, practically, there was no travel happening, so that was the smallest segment, but nothing much happened there, but we are seeing good growth in property and health insurance. In the life insurance, the unit linked insurance, which is linked to the market, there has been significant de-growth across the market. However, our company at a well-balanced portfolio including traditional products, which give guarantees as well as term life. And we are seeing good traction in both our guaranteed products and the term life business, which to some extent makes up for the loss of unit linked business.

And thank you for the compliment for our secretarial team. I think we are committed to serving our shareholders giving the best possible service.

Sanjiv Bajaj: Thanks, Sreeni. I'll just add that there's a question on the PM cares fund. A total of ₹ 10 crore was contributed, but importantly ₹ 5 crore was contributed by employees of our various companies, that was out of their own salaries. And each of our respective companies match that so the total ₹ 10 crore, so the ₹ 5 crore from the companies went through the, from those CSR funds. I'll again, second what Sreeni said and thank our second speaker. Yes, the secretarial department over the last eight weeks, has gone through a lot of effort, a lot of time was spent in going through this whole process to make today's event run smoothly, including engaging with many of you all to ensure that your questions would be properly answered and you would get enough time today.

With that, let me move ahead. Those members present and who have not voted earlier, I would request them to cast their votes using the facility provided by KFin. The e-voting process will be kept open for 10 more minutes. I will request Sonal, our Company Secretary, and Shri Limaye, the Scrutinizer to co-ordinate for an orderly conduct of the e-voting. The results of the meeting along with the consolidated scrutinizers’ report would be declared and posted on the Company's website and KFin's website, not later than 23 July and shall also be submitted to the stock exchanges. Recording transcript will also be made available on the Company's website as soon as possible. Let me now hand over the proceedings to the Company Secretary and Scrutinizer to complete the e-voting formalities.

And once again, stay safe and together we will come out victorious through this pandemic. So, subject to the e-voting at the meeting, I declare the business of the meeting concluded. Thank you again for participating all our shareholders, our directors, and our senior executives.

Thank you.

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