ANNUAL REPORT OF HOME CREDIT FINANCE PRIVATE LIMITED FOR THE YEAR 2018-19

DIRECTORS’ REPORT

Dear Members,

The Directors of your Company take pleasure in bringing you the 22nd Annual Report of your Company along with the Audited Accounts for the financial year from 01st April 2018 to 31st March 2019.

PERFORMANCE HIGHLIGHTS  Income for the year increased from INR 1,097.01 Crores to INR 2,458.91 Crores as compared to INR 1,361.90 Crores in 2017-18;  Revenue from operations for the year was INR 2,443.70 Crores as compared to INR 1,330.58 Crores in 2017-18, a growth of 83.66%  Loss before tax for the year was INR 86.34 Crores as compared to INR 326.88 Crores in 2017-18;

FINANCIAL RESULTS

Year Ended Year Ended Particulars 31-Mar-19 31-Mar-18 (In Lakhs INR) (In Lakhs INR) Revenue from operations 2,44,370.34 1,33,057.82 Other income 1,520.88 3,132.18 Employee benefits expenses and Others expenses 1,14,785.56 91,547.31 Profit/ (loss) before Depreciation, Finance Costs, 1,31,105.66 44,642.69 Exceptional items and Tax Expense Less: Depreciation/ Amortization/ Impairment 86,695.41 45,391.29 Profit / (loss) before Finance Costs, Exceptional items 44,410.25 -748.60 and Tax Expense Finance costs 53,044.65 31,939.63 Profit / (loss) before Exceptional items and Tax Expense -8,634.40 -32,688.23 Add/(less): Exceptional items - - Profit / (loss) before Tax Expense -8,634.40 -32,688.23 Less: Tax Expense (Current & Deferred) 43,763.56 - Profit / (loss) for the year (1) 35,129.16 -32,688.23 Other comprehensive income/ (loss) for the year, net of -355.99 -55.81 tax (2) Total (1+2) 34,773.17 -32,744.04 Balance of profit / (loss) for earlier years -1,21,287.55 -88,543.51 Less: Transfer to Debenture Redemption Reserve Less: Transfer to Reserves (Statutory) -7,025.83 - Less: Dividend paid on Equity Shares - - Less: Dividend paid on Preference Shares - - Less: Dividend Distribution Tax - - Balance carried forward to Balance Sheet -93,540.21 -1,21,287.55

STATEMENT OF AFFAIRS

Home Credit India reckons the financial year 2018-19 as a year of robust volume growth aided by prudent operating cost, effective risk management and optimum utilization of resources. The Company has been able to establish a significant presence in the lending space and has emerged as one of the leading NBFCs in India catering to the requirement of small/medium ticket size retail customers. Consequent to expansion activities undertaken by the Company in the previous years, the financial year under consideration witnessed a sharp rise as far as overall volumes are concerned.

As on March 31, 2019, Home Credit India has an employee base of over 15,000 and has been consistently expanding operations since its entry in 2011, with its operations spread over 179 cities across 20 States in India. The Company has a strong network of around 29,000 points-of-sale (PoS) as on March 31, 2019 with strong relationship in Mobile, laptop, Consumer durables & two wheeler market. The Company is a leader in sub INR 10,000 category of consumer finance lending as per CRIF Report March 2019. Your Company’s nationwide network of branches and locally recruited employees has facilitated in catering to the diverse financial requirements of its customers by identifying and understanding the needs and aspirations of the people. With its strong presence across the country, your Company is providing flexible financing opportunities to aspiring individuals to realize their dreams and helping them to grow. Your Company believes that incessantly serving its customers and channel partners and enhancing customer relationship is the starting point of a great successful journey.

During the financial year ended March 31, 2019 the Company has first time reported Profit after tax (PAT) of INR 347.73 Crores as compared to Loss after tax of INR 327.44 for the previous year which is mainly driven from higher sales volume and increased customer base of the Company and recognition of deferred tax assets of INR 469.18 Crores. The year 2018-19 was another year of improved operating performance, financial growth and driving new initiatives for Home Credit. The overall disbursement registered a growth of 12% at INR 8,272 Crores as compared to INR 7,387 Crores in the previous year. Total Income grew by 81% at INR 2,458.91 Crores for the year ended 31st March, 2019 as compared to INR 1,361.90 Crores for the previous year. Loss before tax stood at INR 86.34 Crores as compared to INR 326.88 Crores for the previous year registering a decline of 73.59%. During the year under review, the Interest income has increased by 71.63% from INR 1,229.27 Crores in 2017-18 to INR 2,109.74 Crores in 2018-19.

As at March 31, 2019, the Capital Adequacy Ratio of the Company stood at 30.63% which is not only higher than the previous year but also well above the RBI norms. Tier I capital adequacy was 29.63% and Tier II capital adequacy was 1.03%. During the year under review, the Assets Under Management stood at INR 6448 Crores as at 31st March, 2019 as against INR4621 Crores as at 31st March, 2018, a growth of 27%. .

Your Company has earned the trust and confidence of its customers with its consistent, transparent and reliable services and as a result, customer satisfaction across its network continues to remain high. Your Company has cumulatively financed the aspirations of over nine million customers since its inception, most of whom had no prior credit history. The Company has launched a suite of new products and services to meet the diverse financial needs of our retail customers. Your Company’s philosophy of helping customers by providing tailor-made products and services has given a big boost in transforming their lives.

The NBFC sector experienced liquidity problems in the second half of the financial year 2018-19. The funding squeeze has contributed to higher funding costs and a slowdown in loan growth for non-banking financial companies. Your Company continued to focus on managing cash efficiently and ensured that it had adequate liquidity and back-up lines of credit. While concerns around low liquidity and asset–liability mismatch impacted the sector, at Home Credit, we continued to grow with a focus on building a healthy book.

In order to support this exponential growth, your Company has ensured immense focus on systems, controls and infrastructure especially on Information Technology. The Company has set up a robust IT infrastructure which is capable to meeting the business needs as of now and going forward as well. The Company is also in the process of evaluating various new products and offering channels. The Company has already initiated offering various value added services as also the novel channels of offering various loan products. The

Company is aggressively working developing online Risk Based pricing model which shall enable the customers to borrow funds through various digital channels.

During the year under review, your Company continued with its diverse methods of sourcing funds in addition to regular borrowings like Non-Convertible Debentures, Term Loans, Fixed Deposits, Commercial Papers, and Securitisation Transactions etc. and has maintained prudential Asset/ Liability match throughout the year. Your Company sourced loans from banks and other institutions at attractive rates. Your Company, for the first time during the year has raised funds through issuance of Commercial Paper and External Commercial Borrowings (“ECB”).

The Company is also proposing to enter into new line of business of offering general and/or life insurance products/protection plans/extended warranty/value added services to its customers on standalone basis. In this regard, the Company has obtained approval of IRDAI to act as corporate agent (composite) for offering various general and/or life insurance products vide registration certificate dated August 20, 2019.

Your Company and its Board wish to place on record their heartiest thanks to our shareholders for their continued support for the regular equity infusion and guidance.

IMPLEMENTATION OF INDIAN ACCOUNTING STANDARDS (“IND AS”)

Your Company has prepared the Financial Statements in accordance with Indian Accounting Standards (“IND AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended by the Companies (Indian Accounting Standards) Rules, 2016. The Company has adopted IND AS from 1st April, 2018 with effective transition date of 1st April, 2017 and accordingly, these Financial Statements together with the Financial Statements for the comparative reporting period have been prepared with the recognition and measurement principles stated therein, prescribed under Section 133 of the Companies Act, 2013 (“the Act”) read with relevant Rules issued thereunder and the other accounting principles generally accepted in India.

This transition to IND AS has been carried out from the erstwhile Accounting Standards notified under the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended), guidelines issued by the Reserve Bank of India (“RBI”) and other generally accepted accounting principles in India (collectively referred to as ‘‘the previous GAAP”). Accordingly, the impact of transition has been recorded in the opening reserve as at 1st April, 2017 and the corresponding adjustments pertaining to comparative previous year as presented in these Financial Statements have been restated/reclassified in order to conform to current year presentation.

SHARE CAPITAL

Capital Structure

The Authorised Share Capital of the Company as on March 31, 2019 was INR 21,000,000,000/- (Indian Rupees Twenty One Billion Only) comprising of 2,100,000,000 (Two Billion One Hundred Million) equity shares of INR 10/- (Indian Rupees Ten only).

The paid up equity share capital as on 31st March, 2019 was INR 9,765,831,830/- (Nine Billion Seven Hundred Sixty Five Million Eight Hundred Thirty One Thousand Eight Hundred Thirty Only). The Company has neither issued shares with differential voting rights nor granted stock options nor sweat equity shares during the period under review.

During the year under review, the Company has made following allotment of equity shares of face value of INR 10 through right issue to Home Credit India B. V, existing shareholders of the Company : 1. 12,500,000 equity shares allotted, on May 31, 2018 at a premium of INR 38/- per share.

2. 14,417,500 equity shares allotted on June 29, 2018 at a premium of INR 44/- per share. 3. 38,687,075 equity shares 5allotted on July 31, 2018 at a premium of INR 43/- per share. 4. 54,000,000 equity shares allotted on October 17, 2018 at a premium of INR 40/- per share. 5. 80,000,000 equity shares, allotted on January 31, 2019 at a premium of INR 40/- per share.

During the year under review, the Company has made following issue of Non-Convertible Debentures, through private placement basis - 1. 4,000 NCD’s for having face value of INR 1,00,000/- and issue price of INR 1,00,000/- has been issued to Unifi AIF on July 25, 2018 having maturity date January 25, 2021. 2. 1,500 NCD’s having face value of INR 10,00,000/- and issue price of INR 987,464.24/- has been issued to JM Financial Products Limited on September 18, 2018 at a discount of INR 12,535.76/- having maturity date February 18, 2020. 3. 500 NCD’s having face value of INR 10,00,000/- and issue price of INR 983,504.43/- has been issued to JM Financial Products Limited on March 28, 2019 at a discount of INR 16,495.57/- having maturity date September 25, 2020, through Electronic Book Building Mechanism.

During the year under review, the Company has raised funds through External Commercial Borrowings (ECBs) through automatic route in the following manner from the Group Company with common overseas parent:

1. Indian Rupees Loan in the form of External Commercial Borrowing, equivalent to INR 176,00,00,000/- (Indian Rupees One Hundred Seventy-Six Crores Only) for a term/minimum average maturity of 3 (three) years 15 (fifteen) days from the date of drawdown for the purposes of on-lending to customer base of the Company.

During the year under review, the Company has assigned/securitised the following receivables arising from its pool: 1. Securitisation of pool of consumer durable loan having amount (pool principal) of INR 56,16,54,632 (Indian Rupees Fifty-Six Crore Sixteen Lakh Fifty-Four Thousand Six Hundred Thirty-Two) executed on June 28, 2018. 2. Securitisation of pool of cash loan having amount (pool principal) of INR 1,047,361,828 (Indian Rupees One Hundred Four Crore Seventy-Three Lakh Sixty-One Thousand Eight Hundred Twenty Eight) executed on June 28, 2018. 3. Securitisation of pool of cash loan having amount (pool principal) of INR 52,21,79,971 (Indian Rupees Fifty Two Crore Twenty One Lakh Seventy Nine Thousand Nine Hundred Seventy One) executed on March 29, 2019. 4. Securitisation of pool of consumer durable loan having amount (pool principal) of INR 1,09,03,61,936 (Indian Rupees One Hundred Nine Crore Three Lakhs Sixty-One Thousand Nine Hundred Thirty-Six) executed on March 30, 2019. 5. Assignment of pool of cash loan having amount (pool principal) of INR 999,939,401(Indian Rupees Ninety Nine Crore Ninety Nine Lakhs Thirty Nine Thousand Four Hundred and One) executed on July 23, 2018

However, the Company has neither issued shares with differential rights as to dividend, voting or otherwise, nor has issued sweat equity, Employee Stock Options, during the year under review.

Holding Company, Subsidiary Company and Associate Company

Your Company is the subsidiary of Home Credit India B. V. having its registered seat at Strawinskylaan 933, 1077 XX , The .

The Company has no subsidiary or associate company in India as defined in the Companies Act, 2013.

BOARD OF DIRECTORS

Changes in the Board of Directors during the financial year 2018-19

During the financial year, following changes took place in the composition of Board of Directors of the Company.

On the recommendation of Nomination and Remuneration Committee, Mr. Pramod Kumar Panda has been appointed as an Additional Independent Director on June 28, 2018 by the Board of Directors of the Company. His appointment was further regularized as an Independent Director of the Company with effect from June 28, 2018 by the shareholders of the Company in the 21st Annual General Meeting held on September 24, 2018. Mr. Pramod Kumar Panda is a MSc. in financial regulation from London University, M.A. in Political Science and Bachelors of Arts in Law from Utkal University.

On the recommendation of Nomination and Remuneration Committee, Dr. Tamali Sen Gupta has been appointed as an Additional Woman Independent Director on July 27, 2018 by the Board of Directors of the Company. Her appointment was further regularized as an Independent Director of the Company with effect from July 27, 2018 by the shareholders of the Company in the 21st Annual General Meeting held on September 24, 2018. Dr. Tamali Sen Gupta is a B.A. Econ. (Hons.) from Lady Shriram College (Delhi University) and a law graduate (Delhi University) and has also completed her LLM from Stanford University.

On the recommendation of Nomination and Remuneration Committee, Mr. Ondrej Kubik has been appointed as a Chief Executive Officer (CEO) effective from August 01, 2018 in the Board meeting held on July 27, 2018. Also, he has been futher appointed as an Additional Director on August 28, 2018 by the Board of Directors of the Company. His appointment was further regularized as Whole-time Director of the Company for a period of three years with effect from August 28, 2018 by the shareholders of the Company in the 21st Annual General Meeting held on September 24, 2018. Mr. Ondrej Kubik has graduated from the University of Economics in Prague with a Master’s degree in finance and commercial law and Harvard Business School in General Management Program. Mr. Ondrej Kubik is a member of Association of Chartered Certified Accountants (ACCA) since 2002 and a Chartered Financial Analyst since 2006. Mr. Ondrej Kubik has been associated with Home Credit Group since February 2008. His career spans from accounting and financial consultancy to top executive positions in Home Credit countries. Previously, he has served on senior positions as Chief Executive Officer and Chief Financial Officer in banking entities of Home Credit Group in and for almost 10 years.

During the year under review, the appointment of Mr. Pavel Krbec, who was appointed as an Additional Director in the Board meeting held on January 31, 2018, was regularized as the Non-Executive Director of the Company at the 21st Annual General Meeting of the Company held on September 24, 2018.

During the year, Ms. Jindra Hachova has resigned from the position of the Whole-time Director of the Company with effect from close of business hours of May 30, 2018. The Board would like to extend its heartiest thanks for guidance and support extended by Ms. Hachova during her tenure as Whole-time Director of the Company.

During the year, Mr. Pavel Maco has resigned from the position of the Whole-time Director and Chief Executive Officer of the Company designated as Key Managerial Personnel, with effect from close of business hours of August 28, 2018. The Board would like to extend its heartiest thanks for guidance and support extended by Mr. Pavel Maco during his tenure as Whole-time Director and Chief Executive Officer of the Company.

Mr. Pramod Kumar Panda has resigned from directorship of the Company with effect from July 25, 2019.

Number of Meetings of the Board of Directors during the financial year 2018-19

During the year ended 31st March 2019, 8 (Eight) meetings of the Board of Directors were held (i.e. on 05.04.2018, 30.05.2018, 28.06.2018, 27.07.2018, 28.08.2018, 16.10.2018, 13.12.2018 and 25.01.2019). The intervening gap between the two continuous meetings was within the period prescribed under the Companies Act, 2013. The details of number of Board meetings attended by respective Directors are tabulated below:

Name of Director Designation Board Meetings attended during the FY 2018-19 Mr. Pavel Maco (resigned w.e.f. August 28, 2018) Whole-time Director/CEO 5(Five) Ms. Jindra Hachova (resigned w.e.f. May 30, 2018) Whole-time Director 2(Two) Mr. Ondrej Kubik Whole-time Director/CEO 3(Three) Mr. Pavel Rozehnal Non-executive Director 1(One) Mr. David Minol Non-executive Director 3(Three) Mr. Pavel Krbec Non-executive Director 3(Three) Mr. Vijay Dhingra Whole-time Director 8(Eight) Dr. Tamali Sen Gupta Woman Independent 4(Four) Director Mr. Pramod Kumar Panda Independent Director 5(Five)

KEY MANAGERIAL PERSONNEL

During the year, Mr. Pavel Maco has resigned from the position of Chief Executive Officer of the Company designated as Key Managerial Personnel, with effect from close of business hours of August 28, 2018. During the year, Mr. Ondrej Kubik has been appointed to take over the position of Chief Executive Officer designated as Key Managerial Personnel of the Company.

Accordingly, Pursuant to Section 203 of Companies Act, 2013, following employees of the Company have been designated as the Key Managerial Personnel of the Company by the Board of Directors of the Company as on March 31, 2019:

1. Mr. Ondrej Kubik (Chief Executive Officer) 2. Mr. Anirban Majumder (Chief Financial Officer) 3. Mr. Gaurav Sharma (Company Secretary)

CORPORATE GOVERNANCE

Your Company practices a culture that is built on core values and ethical governance practices. Your Company is committed to transparency in all its dealings and places high emphasis on business ethics. The Company recognises its role as a corporate citizen and endeavours to adopt the best practices and the highest standards of corporate governance through transparency in business ethics, accountability to its customers, Government and others. The Company’s activities are carried out in accordance with good corporate practices and the Company is constantly striving to better these practices by adopting best practices.

The Company believes that governance practices enable the Management to direct and control the affairs of the Company in an efficient manner and to achieve the Company’s goal of maximising value for all its stakeholders. The Company will continue to focus its resources, strengths and strategies to achieve its vision

of becoming a leading financial services company in India. As a part of the Home Credit Group, Home Credit has a strong legacy of fair, transparent and ethical governance practices.

COMMITTEES OF THE BOARD

The Board has constituted Committees with specific terms of reference to focus on specific issues and ensure expedient resolution of diverse matters.

AUDIT COMMITTEE

Pursuant to the requirement of the NBFC Regulations and Companies Act, 2013, the Company has constituted an Audit Committee. The Board reviews the working of the Committee from time to time to bring about greater effectiveness in order to comply with the various requirements of the NBFC Regulation and the Companies Act, 2013. i. Composition

The Composition of Audit Committee as at March 31, 2019 is as under:

S. No Name of Director Category 1. Mr. Ondrej Kubik Whole-time Director and Chief Executive Officer 2. Mr. David Minol Non- executive Director 3. Mr. Pramod Kumar Panda* Independent Director 4. Dr. Tamali Sen Gupta Woman Independent Director *Mr. Pramod Kumar Panda has resigned from the post of Independent Director of the Company with effect from July 25, 2019. ii. Meeting and attendance during the year

During the financial year 2018-19, the Committee met two times on 28th May, 2018, and 13th December, 2018.

The attendances of Members at the meetings of the Committee held during the year are as follows:

S. No Name of Member No. of Meetings Attended 1. Mr. Pavel Rozehnal One 2. Mr. David Minol One 3. Mr. Pavel Maco* Leave of Absence granted 4. Mr. Pavel Krbec One 5. Mr. Ondrej Kubik** One 6. Mr. Pramod Kumar Panda** One 7. Dr. Tamali Sen Gupta** One

*Mr. Pavel Maco, Whole-time Director & Chief Executive Director has resigned from the Board w.e.f. August 28, 2018 and consequently from the Audit Committee. **Mr. Ondrej Kubik, Whole-time Director & Chief Executive Director, Mr. Pramod Kumar Panda, Independent Director and Dr. Tamali Sen Gupta, Woman Independent Director has been appointed as the members of the Audit Committee w.e.f. October 16, 2018. iii. Terms of Reference

The terms of reference of the Audit Committee are in accordance with NBFC Regulations and the Companies Act, 2013. These broadly includes review and monitor the auditor’s independence and performance and effectiveness of audit process and the disclosure of its financial information, review of financial statements,

review of compliances and review of the internal financial control and the risk management systems and approval or any subsequent modification of transactions of the Company with related parties and to take note of the transactions, if any, related to trading or dealing in Securities of the Company by the Designated Persons etc.

NOMINATION & REMUNERATION COMMITTEE

Pursuant to the requirement under NBFC Regulations and the Companies Act 2013, the Company has a Nomination & Remuneration Committee. i. Composition

The Composition of Nomination & Remuneration Committee as at March 31, 2019 is as under:

S. No Name of Director Category 1. Dr. Tamali Sen Gupta Woman Independent Director 2. Mr. David Minol Non- executive Director 3. Mr. Pavel Krbec Non- executive Director ii. Meeting and attendance during the year

During the financial year 2018-19, the Committee met one time on 30th May, 2018.

The attendance of Members at the meeting of the Committee held during the year is as follows:

S. No Name of Member No. of Meetings Attended 1. Mr. Pavel Rozehnal Leave of Absence granted 2. Mr. David Minol One 3. Mr. Pavel Maco* One 4. Dr. Tamali Sen Gupta NA 5. Mr. Pavel Krbec One

* Mr. Pavel Maco, Whole-time Director & Chief Executive Director has resigned from the Board w.e.f. August 28, 2018 and consequently from the Nomination & Remuneration Committee. iii. Terms of Reference

Terms of Reference of Nomination & Remuneration Committee includes:

i. To review, recommend and/ or approve the remuneration that can be offered to the proposed whole time director/ managing director/ manager/ Non-executive Director of the Company; ii. To recommend to the Board a policy relating to the remuneration to be paid to directors, key managerial personnel and other employees; iii. To review and recommend the Board of Directors on the re-appointment of the whole time director/ managing director/ manager of the Company; iv. To ensure that the policy on ‘fit and proper criteria’ for directors is followed for determining the suitability of a person for appointment / continuing to hold appointment as a director on the Board and to ensure that proper declarations/undertakings as per RBI Directions are received by the Company for the purpose of due diligence.

v. To ensure that person to be appointed as Director is ‘fit and proper’ and fulfil the set parameters and criteria as may be required by the Company; vi. To review from time to time and recommend to the Board for its consideration on the structure for the Board of Directors of the Company;

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

In compliance with the requirements of Section 135 of the Act, read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors have constituted a Corporate Social Responsibility (CSR) Committee. The CSR Policy of the Company has been approved by the Board on the basis of the recommendations of the CSR Committee. Your Company is committed to spend towards the CSR activities in terms of the applicable guidelines as and when the Company achieves the profitability. i. Composition

Following is the Composition of Corporate Social Responsibility (CSR) Committee as on March 31, 2019.

S. No Name of Director Category 1 Mr. Ondrej Kubik Whole-time Director 2 Mr. David Minol Non- executive Director 3 Mr. Vijay Dhingra Whole-time Director 4 Dr. Tamali Sen Gupta Woman Independent Director ii. Meeting and attendance during the year

During the financial year 2018-19, no Corporate Social Responsibility Committee meeting was held. iii. Terms of Reference

The terms of reference of the Corporate Social Responsibility Committee are in accordance with the Companies Act, 2013. These broadly includes formulating CSR Policy and recommend the same to the Board of Directors, Identifying and recommending CSR activities and budget to the Board and Spending the allocated CSR amount.

Pursuant to the provisions of the Section 135 of the Companies Act, 2013, the Company was not required to spent on CSR activities during the financial year 2018-19.

INDEPENDENT DIRECTORS MEETING

Pursuant to the Act, the Independent Directors shall hold at least one meeting in a year without attendance of non–independent directors and members of the Management. Accordingly, independent directors of the Company met on 13, December 2019. In this meeting, the Independent Directors reviewed the performance of non–independent directors and the Board as a whole; and assessed the quantity, quality and timely flow of information between the Management and the Board, and found it to be in line with the expectations. Mr. Pramod Kumar Panda was elected as Chairman for the meeting. All the Independents Directors of the Company were present at the meeting.

COMLIANCE OF INFORMATION TECHNOLOGY FRAMEWORK FOR THE NBFC SECTOR

Pursuant to RBI Master Direction-Information Technology Framework for the NBFC sector, the Company has constituted an IT Strategy Committee and IT Steering Committee to review the IT strategies in line with its corporate strategies, cyber security arrangements and any other matter related to IT governance.

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 134(5) of the Companies Act, 2013, the Board of Directors hereby confirms that: a. In preparation of the Annual Accounts for the financial year ended 31st March 2019, the applicable Accounting Standards had been followed along with proper explanation to material departures; b. The Directors had selected such Accounting Policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period. c. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. d. The Directors had prepared the Annual Accounts on a going concern basis. e. The Directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. f. The Directors had devised proper systems to ensure compliance with the provisions of all the applicable laws and that such systems were adequate and operating effectively.

DECLARATION BY INDEPENDENT DIRECTORS

The Independent Directors have submitted a declaration of independence, stating that they meet the criteria of independence provided under section 149(6) of the Act, as amended and have complied with the Code for Independent Directors prescribed in Schedule IV to the Act.

The Board took on record the declaration and confirmation submitted by the independent directors regarding them meeting the prescribed criteria of independence.

FORMAL ANNUAL EVALUATION

The Companies Act, 2013 stipulate the evaluation of the performance of the Board, its Committees, Individual Directors and the Chairperson. The Board of Directors at its meeting held on October 16, 2018 has laid down the criteria’s for carrying out an annual evaluation of the performance of the Board, its Committees and of individual Directors pursuant to the provisions of the Act and relevant Rules

Pursuant to the provisions of the Companies Act, 2013, the Board has carried out an annual evaluation of its own performance and that of its Committees as well as performance of the Directors individually (including Independent Directors).

A. Based on the said criteria and the basis the discussions during the course of the meeting, the rating sheet was populated by the Chairman of the Board of Directors with regard to evaluation of performance of the individual Directors, Board and Committees of the Board for the year under review. The Board of Directors reviewed the performance of the individual Directors on the basis of the criteria such as Transparency, Participation in meetings, Ethics and ability to take balanced decisions etc. The performance of the Board & Committee was evaluated by the Board on the basis of various criteria such as composition, decision making ability, quality of deliberations, open communication, meaningful participation, and timely resolution of issues etc.

B. Qualitative comments and suggestions of Directors were taken into consideration by the Chairman of the Board. The feedback of the Independent Director on their review of the performance of Non- Independent Directors and the Board as a whole and the assessment of the quality, quantity and timeliness of flow of information between the Company, the Management and the Board was taken into consideration by the Board in carrying out the performance evaluation.

C. A consolidated summary of the ratings given was then prepared and the report of performance evaluation so arrived at was then noted and discussed by the Board at their meetings held on September 17, 2019. The performance evaluation concluded on the note that each of the individual directors, Committees and the Board as a whole, were performing efficiently and effectively and shared a common vision to turning organization goals into reality.

EMPLOYEES

To Home Credit India, its people are a very valuable resource and it has built an open, transparent and meritocratic culture to nurture this asset. In an increasingly competitive market for talent, the Company continues to focus on attracting and retaining right talent. It is committed to provide right opportunities to employees to realise their potential. Our constant endeavour is to invest in people and processes to improve human capital for the organisation and service delivery to our customers. Given growth plans of the Company, an important strategic focus of the Company is to continue to not only nurture its human capital, but also proactively focus on preparing all employees for the challenges of the future. The Company strives to provide a conducive and competitive work environment to help the employees excel and create new benchmarks of productivity, efficiency and customer delight.

The Company has reinforced a culture of performance and meritocracy by deploying transparent and agreed goals. These agreed goals cascade from the Company’s growth strategy and plans. The Company has implemented an online performance management system i.e. ‘ASPIRE’ for setting up of goals and objectives of all employees and thereby tracking it on a regular basis. Appraisals are also completed based on these goals and objectives filled by the employees. Attracting and retaining bright talent and improvement in the quality of manpower are identified as key challenge and being addressed accordingly through product training and retention initiatives.

Home Credit’s mission on creating a high performance culture has been further strengthened through areas like building a capability model (identification of critical competencies), nurturing talent through interventions such as mentoring, competency based training programs and cross functional projects.

Your Directors wish to place on record the appreciation for the efforts and dedication of the employees in achieving good results during the year.

The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of particulars of employees of the Company, are set out in the “Annexure A” & “Annexure B” to this report.

PUBLIC DEPOSITS

During the financial year 2018-19, the Company has not accepted any public deposit. The resolution has been passed by the Board of Directors on in its meeting held on April 25, 2019 confirming that the Company has neither accepted nor held any public deposit as defined in RBI Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016, as amended from time to time and that the Company shall neither accept nor hold in financial year 2019-20 any public deposit as defined in Non-

Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016, as amended from time to time.

AUDITORS AND AUDITORS’ REPORT

STATUTORY AUDITORS

Pursuant to the provisions of section 139 of the Companies Act, 2013, the shareholders of the Company at the Annual General Meeting held on September 28, 2016 has on the recommendations of the Board of Directors, appointed M/s. B S R & Associates LLP, Chartered Accountants as the Statutory Auditors of the Company for a consecutive term of 5 years (2016-17 to 2020-21) subject to ratification by members at each subsequent Annual General Meeting. Pursuant to the Notification issued by the Ministry of Corporate Affairs on 7th May, 2018 amending Section 139 of the Companies Act, 2013 and the applicable Rules, the mandatory requirement for ratification of appointment of Auditors by the Members at every AGM has been omitted. However, as good corporate governance practice, ratification of appointment of Statutory Auditors is being sought from the members of the Company at the ensuing Annual General meeting of the Company.

The Company has received from M/s. B S R & Associates LLP, a certificate dated May 07, 2019 to the effect that they are eligible to continue with their appointment and that they have not been disqualified in any manner from continuing as Statutory Auditors.

STATUTORY AUDITORS’ REPORT The Auditors’ Report to the shareholders does not contain any qualification, reservation or adverse remark. The notes to the Accounts referred to in the Auditors’ Report are self-explanatory and do not call for further comments.

SECRETARIAL AUDITOR The Board of Directors appointed M/s Anjali Yadav & Associates, Practicing Company Secretaries, as Secretarial Auditor of the Company for Financial Year 2018-19 for conducting the audit of the secretarial and related records of the Company.

SECRETARIAL AUDITORS’ REPORT Pursuant to section 204 of the Companies Act, 2013, every listed company is required to annex with its Board’s Report, a Secretarial Audit Report given by a Company Secretary in practice, in the prescribed format. Their report is annexed to this Board Report as Annexure D. There are no qualifications, reservations or adverse remarks made in the Secretarial Audit Report

REPORTING OF FRAUDS BY AUDITORS

During the year under review, neither the statutory auditor nor the secretarial auditor has reported to the audit committee, under section 143(12) of the Companies Act, 2013, any instances of the fraud committed against the committee by its officers or employees, the details of which would need to be mentioned in the Board report.

DEBENTURE TRUSTEE

During the year, the Company has issued non-convertible debentures to Foreign Portfolio Investors and domestic investors. As per the requirement under Companies Act, 2013 and SEBI regulations, the Company has appointed Catalyst Trusteeship Limited (formerly known as GDA Trusteeship Limited) with CIN

U74999PN1997PLC110262 and having its registered office at GDA House, Plot No. 85, Bhusari Colony, Paud Road, Pune - 411 038 and branch office at Windsor, 6th floor, Office No. 604, C.S.T. Road, Kalina, Santacruz (East), Mumbai 400098, India as the Debenture Trustee for the non-convertible debentures issued by the Company.

LOAN, GUARANTEES & INVESTMENT

The Company, being a non-banking finance company registered with the Reserve Bank of India and engaged in the business of granting loans and finance in the ordinary course of its business, is exempt from complying with the provisions of section 186 of the Companies Act, 2013 in respect of loans and guarantees. Accordingly, the disclosures of the loans as required under the aforesaid section have not been given in this report.

CREDIT RATING

As on March 31, 2019, the Non-Convertible Debentures issued and other borrowings raised by the Company retained the below ratings –

Non-Convertible Debentures*

Rating ISIN Outstanding as at Rating as at Rating as at Agency 31 March 2019 31 March 2019 31 March 2018 (In Lakhs) CARE INE172V07012 18,750 A- STABLE BBB STABLE CARE INE172V07020 18,750 A- STABLE BBB STABLE CARE INE172V07038 22,500 A- STABLE BBB STABLE CRISIL INE172V07046 22,500 BBB+/STABLE BBB+/STABLE CRISIL INE172V07053 25,000 BBB+/STABLE BBB+/STABLE CRISIL INE172V07061 35,000 BBB+/STABLE BBB+/STABLE CRISIL INE172V07079 37,500 BBB+/STABLE BBB+/STABLE CRISIL INE172V07087 22,500 BBB+/STABLE BBB+/STABLE CRISIL INE172V07103 22,200 BBB+/STABLE BBB+/STABLE CRISIL INE172V07111 40,000 BBB+/STABLE BBB+/STABLE CRISIL INE172V08051 5,000 BBB+/STABLE BBB+/STABLE CRISIL INE172V07152* 1,500 BBB+/STABLE BBB+/STABLE CRISIL INE172V07129 5,000 BBB+/STABLE BBB+/STABLE India Ratings INE172V07137 3,000 IND A-/STABLE - India Ratings INE172V07145 15,000 IND A-/STABLE - India Ratings INE172V07160 5,000 IND A-/STABLE -

*The Company has made intimation regarding change in credit rating of NCDs to stock exchange, trustee and RBI within the stipulated time. * *The NCDs amounting INR 15 Crores pertaining to ISIN INE172V07152 is fully redeemed on June 13, 2019.

Other Borrowings*

Facility CARE CRISIL Fitch India Brickworks Long term borrowing A-, Stable BBB+, Positive A-, Stable - Short term borrowing - - A1 A1 Commercial papers - - A1 A1

*The Company has made intimation to RBI regarding change in credit rating with respect to term loan borrowing.

RELATED PARTY TRANSACTION

All related party transactions that were entered into during the financial year were on an arm’s length basis and in the ordinary course of business. There were no materially significant related party transactions made by your Company with its Promoters, Directors, Key Managerial Personnel’s or other designated persons which might have a potential conflict with the interest of the Company at large. The Related Party Transactions were placed before the Audit Committee for its approval. During the year, the Company has not entered into any transactions with Related Parties which are not in its ordinary course of business or not on an arm’s length basis and which require disclosure in this Report in terms of the provisions of Section 188(1) of the Act.

The Company has framed policy on related party transactions in compliance with RBI directions. None of the Directors has any pecuniary relationships or transactions vis-à-vis the Company.

Further, details of Related Party Transactions, as required to be disclosed by Indian Accounting Standard – 24 on “Related Party Disclosures” specified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015, are given in the Notes to the Financial Statements.

SIGNIFICANT/MATERIAL ORDERS PASSED BY THE REGULATOR OR COURT OR TRIBUNALS

There were no significant/material orders passed by any Regulator or Court or Tribunal which would impact the going concern status of the Company and its future operations.

TRANSFER TO RESERVES

Pursuant to guidelines issued by Reserve Bank of India, the Company has transferred 20% of its profits to the Reserves in terms of section 45-IC (1) of the Reserve Bank of India Act, 1934.

DIVIDEND

In the absence of adequate profits for financial year 2018-19, no dividend is permitted to be paid to the members as per the provisions of the Companies Act, 2013 and rules made thereunder.

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY There are no material changes and commitments, affecting the financial Position of the Company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO.

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3) (m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014 is given below: A. Conservation of Energy: The operations of your Company are not energy intensive. Adequate measures have, however, been taken to reduce energy consumption, wherever possible. As energy costs form a very small part of the cost, the impact on cost is not material. Your Company is primarily involved in providing services which do not result in significant consumption of power and energy; hence energy conservation measures are not very relevant. Also, the loans and financing business is

not covered under the list of industries, which should furnish this information in Form A annexed to the aforesaid Rules. B. Technology Absorption: Your Company is primarily engaged in the business of loans and financing. There is no usage of any particular technology or process. Hence, the Company is not required to provide any specific information/ inputs on technology absorption. C. Foreign exchange earnings and outgo:

Sr. No. Particulars Year ended Year ended March 31, 2019 March 31, 2018 1. Expenditure in foreign currency 1,37,36,96,689 93,05,24,765 2. Earning in foreign currency - -

RISK MANAGEMENT

The Board of Directors has adopted and reviewed Risk Acceptance Policy for the Company on a regular basis which provides for identification, assessment and control of risks. The risk management framework is followed for all functions and processes and captures risks that can impact people, process or technology. The Management identifies and controls risks through a properly defined framework in terms of the aforesaid policy. For continual review of risk events and its impact, the Board of Directors of the Company has formed an Integrated Risk Management Committee to frame, implement and monitor the risk management plan for the Company. The Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

VIGIL MECHANISM

The Company has a vigil mechanism policy to deal with instance of fraud and mismanagement, if any. Vigil mechanism policy ensures that the activities of the Company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism. The vigil mechanism provides for adequate safeguards against victimization of persons and ensures that any employee, officer and director who violates the requirements of this policy will be subject to disciplinary action.

REMUNERATION POLICY

The Policy on Directors appointment and remuneration forming party of Terms of Reference of Nomination & Remuneration Committee (‘Remuneration Policy’), including criteria for determining qualifications, positive attributes and independence of the Directors and other matters provided under sub-section (3) of Section 178 of the Companies Act, 2013 adopted by the Board, has been uploaded on the website of the Company on web link https://www.homecredit.co.in/corporate-governance.

INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

Your Company has aligned its current systems of internal financial control with the requirement of Companies Act 2013. The Company is continuing to monitor the efficacy of Internal Controls through a comprehensive Internal Control Framework which had been designed to ensure transparency and accountability in an organisation’s process of designing and implementing a system of internal control. Through this framework risks in the company are identified and analysed and appropriate responses are managed. Moreover, the audit committee reviews the audit reports submitted by internal auditors and statutory auditors of the Company. Suggestions for improvement are considered and the audit committee follows up on corrective action.

The Company’s internal controls systems are commensurate with its size and the nature of its operations. These have been designed as well as operating effectively to provide a reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures and ensuring compliance of corporate policies.

INTERNAL AUDIT

At the beginning of each financial year, an audit plan is rolled out after the same has been approved by the Audit Committee. The audit plan is aimed at evaluation of the efficacy and adequacy of internal control systems and compliance thereof, robustness of internal processes, policies and accounting procedures, compliance with laws and regulations. Based on the reports of internal audit, function process owners undertake corrective action in their respective areas. Significant audit observations and corrective actions thereon are presented to the Audit Committee of Board on time to time basis.

SAFE ENVIRONMENT FOR WOMEN AT WORKPLACE

Your Company is committed to ensure safe and secure environment for women employees of the Company at all the levels and at all the offices of the Company. Accordingly, the Company has duly constituted Internal Committee in compliance of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 which ensures immediate response to the complaints of harassment and fast track procedure disposal for such complaints. During the financial year ended 31st March 2019, 10 (Ten) complaints have been received by the Committee against which necessary action has been taken and all of them has been resolved.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as “Annexure C” and is also hosted on the Company's website at https://www.homecredit.co.in/.

COMPLIANCE WITH REGULATIONS/ DIRECTIONS OF RESERVE BANK OF INDIA APPLICABLE TO NON- BANKING FINANCIAL COMPANIES.

The Company continues to comply with applicable regulations/ directions and other instructions issued by Reserve Bank of India (RBI) from time to time and continues to fulfil all the norms and standards laid down by the RBI in Master Direction – Non Banking Financial Company–Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 issued by Department of Non-Banking Supervision, Reserve Bank of India on September 29, 2016.

HARMONISATION OF DIFFERENT CATEGORIES OF NBFC’s

RBI, vide its circular dated 22 February 2019, harmonised different categories of NBFCs into fewer ones on the basis of the principle of regulation by activity rather than regulation by entity in order to provide greater operational flexibility.

Accordingly, the three categories of NBFCs viz., Asset Finance Companies, Loan Companies and Investment Companies have been merged into a new category called NBFC - Investment and Credit Company. The Company now is categorised as NBFC- Investment and Credit Company (earlier Loan Company).

NON-BANKING FINANCIAL COMPANIES AUDITORS’ REPORT (RESERVE BANK) DIRECTIONS, 2016

Pursuant to the Non-Banking Financial Companies Auditors’ Report (Reserve Bank) Directions, 2016, a report from the statutory auditors to the Board of Directors has been received by the Company. The Company continues to fulfil all the norms and standards laid down by the Reserve Bank of India (RBI) as applicable to the Company.

POLICY ON PREVENTION OF INSIDER TRADING

In terms of the SEBI (Prohibition of Insider Trading) Regulations, 2015, the Company has framed a) Code of Internal Procedures and Conduct for Regulating, Monitoring and Reporting of Trading by Insiders and b) Code of Fair Disclosure. The Company’s Code, inter alia, prohibits dealing in the securities of the Company by an insider, while in possession of unpublished price sensitive information in relation to the Company and also during certain prohibited periods.

SECRETARIAL STANDARDS OF ICSI

Pursuant to the approval from the Ministry of Corporate Affairs, the Institute of Company Secretaries of India (ICSI) has, on 23rd April 2015, notified the Secretarial Standards on Meetings of the Board of Directors (SS–1) and General Meetings (SS–2) effective from 1st July 2015 and revised version effective from 1st October, 2017. The Company is compliant with the same.

ACKNOWLEDGEMENT

Your Company maintained cordial relationships with Reserve Bank of India, Registrar of Companies, Trustees for Debenture holders and other regulatory authorities, Financial Institutions, Banks, Vendors, Suppliers and Customers during the financial year. Your Directors extend their heartiest thanks for the support extended by them and look forward to receiving their continued support and encouragement. Lastly, the Board of Directors also places on record its sincere appreciation of the commitment and hard work put in by the Management and employees of the Company during the year under review.

For and on behalf of the Board of Directors of Home Credit India Finance Private Limited

Sd/- Sd/-

Ondrej Kubik Vijay Dhingra Place: Gurugram Whole-time Director Whole-time Director Date: 17.09.2019 DIN: 08194580 DIN: 01617643