ANNUAL REPORT OF HOME CREDIT INDIA 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).