SML Isuzu Limited

GRUH Finance Limited

Finance and Banking Housing Finance Companies

Credit Perspective

RATING ACTION

Long-term and medium-term ratings placed on Watch with Negative Implications; Short-term rating reaffirmed

Long-Term Rating NCDs - [ICRA]AAA@ Subordinated debt - [ICRA]AAA@

Medium-Term Rating Fixed Deposits – MAAA@

Short-Term Rating Commercial Paper – [ICRA]A1+

Total Rated Debt Rs. 13,285 Crore

January 2019

ANALYST CONTACTS

Karthik Srinivasan Senior Group Vice President +91-22-6114 3444 kartiks@icraindia.com

Supreeta Nijjar Vice President +91-124-4545 324

supreetan@icraindia.com

Deeksha Agarwal Senior Associate Analyst +91-124- 4545 833 deeksha.agarwal@icraindia.com

Rating Rationale

ICRA has placed the long-term ratings outstanding of [ICRA]AAA (pronounced ICRA triple A) for

the Rs. 5,750-crore long-term debt programme and Rs. 35-crore subordinated debt programme

of GRUH Finance Limited (GRUH) on Watch with Negative Implications. The rating of MAAA

(pronounced M triple A) outstanding on the company’s fixed deposits programme has also

been placed on Watch with Negative Implications. ICRA has also reaffirmed the rating of

[ICRA]A1+ (pronounced ICRA A one plus) for GRUH’s Rs. 7,500-crore commercial paper

programme.

ICRA has also withdrawn the rating of [ICRA]AAA with a Stable outlook outstanding on the Rs.

197.00-crore non-convertible debenture (NCD) programme of GRUH. The withdrawal was

made at the request of the company. GRUH has fully redeemed the instruments on maturity

and there is no amount outstanding against the same.

The rating action follows the company’s announcement on January 7, 2019 regarding the

approval given by its board for the amalgamation of GRUH with Bandhan Bank Limited

(Bandhan; rated [ICRA]AA&/[ICRA]A1+). The scheme is subject to various regulatory approvals

including from the Reserve Bank of India (RBI). The appointed date of the scheme shall be

January 1, 2019, or any other date mutually agreed upon by the two companies from which the

scheme shall be operative. As per the share exchange ratio, GRUH’s shareholders would

receive 568 shares of Bandhan for every 1,000 shares held by them. Consequently, HDFC,

which currently holds 57.8% in GRUH, would hold a stake of ~15% in the combined entity and

GRUH would cease to exist as an independent entity.

ICRA’s ratings for GRUH derived significant support from its being a subsidiary of HDFC Limited

(rated [ICRA]AAA(Stable)/ MAAA(Stable)/ [ICRA]A1+). If the proposed amalgamation receives

all requisite approvals, HDFC would no longer be a majority shareholder of GRUH. Hence, ICRA

will continue to monitor the developments closely and will take appropriate rating action once

there is more clarity on the proposed business plans of the combined entity, post the

completion of the transaction.

The ratings factor in the company’s strong franchise and brand image in the western part of

India, especially in Gujarat and Maharashtra, its steady growth in business volumes (~20%

CAGR in disbursements over the last four years), healthy profitability (average return on equity

(RoE) of 30% over the last four years), good financial flexibility with access to diverse funding

sources and good asset quality through business cycles (gross NPAs of 0.88% as on September

30, 2018) despite lending to the relatively vulnerable lower income self-employed segment.

ICRA also takes note of the mismatches in the company’s ALM profile in the short-term

buckets. However, the risk is partly mitigated by GRUH’s policy of maintaining adequate

unutilised bank lines as a liquidity buffer, which can be drawn against the large proportion of

portfolio eligible for priority sector funding.

GRUH Finance Limited

Key Rating Considerations

Credit Strengths

• Demonstrated track record of healthy growth and profitability

• Good asset quality notwithstanding the relatively vulnerable borrower profile

• Diversified funding mix

• Good growth opportunities in affordable housing segment with Government of India’s (GoI) focus on Housing for All

by 2022

Credit Challenges

• Moderate economic capitalisation indicators, given the higher pace of growth compared to internal accruals

• Relatively high ALM gaps; however, adequate unutilised bank lines and cash balances result in comfortable liquidity

profile

• Limited geographical diversity in portfolio

Company Profile

GRUH Finance Limited (GRUH) is an established housing finance company (HFC) with a loan portfolio of Rs. 16,534 crore as

on September 30, 2018 (Rs. 15,568 crore as on March 31, 2018 and Rs. 13,244 crore as on March 31, 2017). HDFC Limited is

the largest shareholder in GRUH with a stake of 57.9% as on September 30, 2018. While GRUH operates as an independent

entity, the parent’s shareholding and presence on its board of directors translates into strong management and strategic

support for the company. GRUH’s corporate office is in Ahmedabad, Gujarat. As on September 30, 2018, it had a

distribution network of 194 retail offices across 11 states and one Union Territory.

EXHIBIT 1: Shareholding pattern – GRUH Finance Limited (as on September 30, 2018)

Source: Company data, ICRA research

HDFC Ltd., 57.86%

Public (Resident Indians), 17.63%

FIIs, 10.47%

Mutual Funds, Banks, Financial

Institutions, 9.97%

NRIs, 2.06% Corporate Bodies, 2.02%

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GRUH Finance Limited

BUSINESS RISK PROFILE

Steady portfolio growth with concentration in western India; most borrowers continue to be from salaried

segment

EXHIBIT 2: Trends in segment-wise breakup of sanctions, disbursements and outstanding portfolio

Sanctions Disbursements Outstanding as of

Mar-16 Mar-17 Mar-18 Mar-16 Mar-17 Mar-18 Mar-16 Mar-17 Mar-18

Loans to Salaried 66% 60% 47% 64% 55% 50% 64% 63% 60%

Loans to Self-Employed 23% 34% 33% 22% 31% 34% 28% 29% 32%

Project Builder Loans 7% 3% 16% 11% 11% 12% 4% 4% 4%

Repair/ Improvement/ Extension 0% 1% 2% 0% 1% 2% 0% 1% 1%

Loans to Professionals 3% 1% 1% 3% 2% 1% 4% 3% 2%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: Company data, ICRA research

GRUH’s portfolio stood at Rs. 15,568 crore as on March 31, 2018 as it registered a steady growth of 18% in FY2018, in line with the growth in past years. Assets under management (AUM) increased further to Rs. 16,534 crore as on September 30, 2018 (17% YoY growth). As on September 30, 2018, the company operated across 133 districts in 11 states with a network of 194 retail offices. GRUH continued to leverage its strong franchise in western India as the portfolio remained concentrated in Gujarat (34% of the portfolio as on March 31, 2018) and Maharashtra (33% of the portfolio as on March 31, 2018), followed by Madhya Pradesh (17% as on March 31, 2018). Given the announcement of the merger with Bandhan Bank Limited, GRUH is expected to tap eastern India for expansion, going forward. The share of self-employed borrowers continued to increase although the salaried segment remained the largest at 60% of the total portfolio as on March 31, 2018. The company maintained its focus on economically weaker sections (EWS) and the low middle income (LMI) groups while the Government’s thrust on affordable housing continued to drive growth for the company. While the share of builder loans in sanctions and disbursements increased in FY2018, it remained at a stable 4% of the portfolio outstanding as on March 31, 2018 as the company had avoided this segment in FY2018 owing to the stress in this sector. However, GRUH remains selective in extending builder loans, restricting the ticket sizes to 10% of its net worth. The overall portfolio mix remained stable in FY2018 and H1 FY2019 with retail loans forming 95% of the loan book as on September 30, 2018. Despite the high risks inherent in the self-employed and low-income segments given the volatility in incomes, the company’s past track record and strong internal processes mitigate the risks to some extent and provide comfort to the credit profile.

EXHIBIT 3: Key portfolio characteristics

Mar-14 Mar-15 Mar-16 Mar-17 Mar-18

Average Ticket Size (in Rs. lakh) 9.28 9.77 8.86 8.86 9.49 Average Original Tenure (in years) 14.7 15.2 15.5 15.8 17.2 Average Loan to Cost Ratio (LCR) 69% 69% 70% 70% 71% Average Fixed Obligation to Income Ratio (FOIR) 34% 34% 34% 34% 33% % of floating rate loans 99% 97% 92% 90% 92% % of portfolio at more than 80% LCR 6% 5% 5% 6% 8% % of portfolio at greater than 20 years residual maturity 28% 18% 10% 11% 12% Prepayment % 11% 11% 12% 12% 14% Source: Company data, ICRA research

The company sources retail business through GRUH referral associates (GRA). GRAs are responsible for sourcing business and collecting preliminary documents, while GRUH retains control over the credit, legal and technical appraisals. GRUH has a largely semi-urban branch network, resulting in its lending rates being higher than those of leading HFCs in metropolitan cities. While the average LCR remained stable, the share of the portfolio at >80% LCR increased by 2% in FY2018 along with an increase in the average ticket size by Rs. 0.63 lakh, indicating a slight increase in the risk profile of the portfolio.

4

GRUH Finance Limited

Asset quality indicators remain comfortable

EXHIBIT 4: Asset quality indicators

In Rs. crore Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Sep-18

Gross NPAs 18.87 25.05 35.55 40.58 70.09 147.07

Provisions 19.64 25.05 25.17 40.58 70.09 129.03

Net NPAs 0.00 0.00 10.38 0.00 0.00 18.04

Net worth 607.24 711.49 835.30 1,113 1,381 1,661

Gross Advances 7,009 8,915 11,115 13,244 15,568 16,534

Gross NPA % 0.27% 0.28% 0.32% 0.31% 0.45% 0.88%

Net NPA % 0.00% 0.00% 0.09% 0.00% 0.00% 0.11%

Net NPA / Net worth 0.00% 0.00% 1.24% 0.00% 0.00% 1.09% Source: Company data, ICRA research

In FY2018, the absolute gross NPA increased to Rs. 70.09 crore from Rs. 40.58 crore in FY2017. Despite a healthy 18% growth in gross advances, the gross NPA percentage also increased to 0.45% as on March 31, 2018 (0.31% as on March 31, 2017). However, the gross NPA was fully provided for, resulting in nil net NPAs as on March 31, 2018. Within segments, the asset quality of the loans given to self-employed and professionals deteriorated in FY2018, pushing up the overall delinquencies.

Further, in H1 FY2019, the absolute gross NPA increased to Rs. 147 crore due to a seasonal uptick against which the company recognised a provision of Rs. 129.03 crore resulting in net NPA of Rs. 18.04 crore as on September 30, 2018. While the company’s asset quality remains under control, the vulnerability of the majority of the borrowers to income shocks could keep the softer bucket delinquencies volatile.

Moderation in growth for HFCs expected in the near term; long-term prospects remain good

As per ICRA’s estimates, the total housing credit outstanding grew by 17% YoY to Rs. 17.8 lakh crore as on September 30, 2018. While the home loan portfolios of HFCs grew at 18%, the home loan portfolios of banks also picked up at 16% YoY growth for the period ended September 30, 2018. Given the increase in securitisation volumes and portfolio buyouts, the growth rate of the home loan portfolios of banks is expected to be higher, going forward. This could also lead to banks forming a higher share of the overall portfolio. The non-housing loan portfolio of HFCs grew at 30% YoY for the 12 months ended September 30, 2018 (29% YoY growth for period ended September 30, 2017) leading to an increase in the share of non-housing loans to 36% as on September 30, 2018 from 34% as on September 30, 2017. As some HFCs aim to go slow on construction finance to conserve liquidity, given the lumpy nature of these loans, the share of non-housing loans should reduce in H2 FY2019. While there might be moderation in the growth estimates for the housing finance sector in H2 FY2019 on account of liquidity concerns, the long-term growth prospects of the sector remain strong on the back of the scope of mortgage penetration in India along with the Government’s initiatives and thrust on housing for all.

FINANCIAL RISK PROFILE

EXHIBIT 5: Key financial indicators

In Rs. crore FY2015 FY2016 FY2017 FY2018 H1 FY2019

Equity Capital 73 73 73 73 146

Net Worth (Reported) 711 835 1,113 1,381 1,662

Loan book 8,926 11,115 13,244 15,568 16,534

Total Assets 9,181 11,443 13,586 15,971 18,374

Total Income 1,060 1,275 1,487 1,687 933

Net Interest Income (Net of BO Costs) 334 409 509 627 349

Profit before Tax (PBT) 301 362 442 562 302

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GRUH Finance Limited

In Rs. crore FY2015 FY2016 FY2017 FY2018 H1 FY2019

Profit after Tax (PAT) 204 244 297 363 221

Yield on Average Earning Assets (%) 12.49% 11.94% 11.55% 11.03% 10.53%*

Cost of average interest-bearing funds (%) 9.19% 8.69% 8.19% 7.48% 7.22%

Gross Interest Spread (%) 3.30% 3.26% 3.35% 3.55% 3.30%*

Net Interest Margin (%) 4.15% 4.04% 4.13% 4.30% 4.05%

Operating Expenses /Average Total Assets 0.76% 0.78% 0.75% 0.71% 0.76%

Provisions & Write-offs / Average Total Assets 0.19% 0.21% 0.22% 0.23% 0.14%

Cost to Income Ratio 15.13% 15.95% 15.56% 13.77% 17.29%

PBT / Average Total Assets 3.67% 3.51% 3.53% 3.80% 3.50%

PAT / Average Total Assets 2.48% 2.36% 2.37% 2.45% 2.56%

Return on Average Net worth 30.91% 31.49% 30.45% 29.08% 29.00%

Total Debt / Net worth 11.61 12.36 10.89 10.24 9.92

Capital / Risk Weighted Assets 15.36% 17.82% 18.32% 18.90% 18.12%

Tier I Capital / Risk Assets 13.89% 16.13% 16.82% 17.68% 16.99%

Gross NPAs% 0.28% 0.32% 0.31% 0.45% 0.88% Source: Company data, ICRA research; * Not adjusted for processing fee/brokerage/commissions, etc

Profitability supported by lower cost of funds amid competitive pressure on yields

EXHIBIT 6: Profitability profile

Source: Company, ICRA research

While the yield on average loans declined to 11.10% in FY2018 from 11.63% in FY2017 on account of competitive pressure, it was more than offset by the decline in the cost of average funds (~70 bps) resulting in an increase in the lending spreads by 18 bps. Consequently, the net interest margin expanded marginally by 17 bps and was further supported by a marginal increase in the non-interest income and a marginal decrease in the operating expenses as a percentage of total assets, thereby yielding a 28-bps increase in the operating profit (as a percentage of total assets). Despite a small increase in the credit costs in FY2018, the company reported a 22% YoY growth in net profitability with profit after tax (PAT) growing to Rs. 362.68 crore on an asset base of Rs. 15,971 crore as on March 31, 2018 from Rs. 296.65 crore on an asset base of Rs. 13,586 crore as on March 31, 2017. While the return on average total assets increased to 2.45% in FY2018 from 2.37% in FY2017, the return on average net worth declined to 29.08% in FY2018 (30.45% in FY2017) on account of healthy internal accruals. Further, in H1 FY2019, the yield on average loans came in at 11.18% while the cost of average funds declined to 7.22% due to the higher share of shorter-tenor borrowings, thereby resulting in an increase in lending spreads to 3.96%. GRUH reported PAT of Rs. 220.60 crore in H1 FY2019 on a total asset base of Rs. 18,374 crore as on September 30, 2018.

Capitalisation position remains healthy with comfortable gearing level

27.0%

28.0%

29.0%

30.0%

31.0%

32.0%

33.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Sep-18

NIM Operating Expenses/ATA Credit Provisions/ATA PAT/ATA PAT/Average Networth

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GRUH Finance Limited

EXHIBIT 7: Capitalisation profile

In Rs. crore Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Sep-18

Tier I % 14.70% 13.89% 16.13% 16.82% 17.68% 16.99%

Tier II % 1.66% 1.47% 1.69% 1.50% 1.22% 1.13%

CAR % 16.37% 15.36% 17.82% 18.32% 18.90% 18.12%

Gearing 10.6 11.6 12.4 10.8 10.17 9.92 Net worth/ Total Advances 8.7% 8.0% 7.5% 8.4% 8.9% 10.0%

Source: Company, ICRA research

The company’s regulatory capital adequacy (18.12% as on September 30, 2018) is supported by the relatively lower risk weights prescribed by National Housing Bank (NHB) for smaller ticket loans, which constitute a large proportion of GRUH’s portfolio. GRUH’s economic capitalisation levels were moderate with a relatively high gearing of 10.17 times as on March 31, 2018. However, the gearing declined to 9.92 times as on September 30, 2018 on account of healthy internal accruals.

Diversified funding mix

EXHIBIT 8: Borrowing mix

In Rs. crore Mar-15 % share Mar-16 % share Mar-17 % share Mar-18 % share Sep-18 % share

Bank Borrowings 2,700 33% 3,931 38% 4,320 36% 5638 40% 4956 30%

NCD 650 8% 847 8% 2,387 20% 4097 29% 3797 23%

Subordinated NCD 35 0% 35 0% 35 0% 35 0% 35 0%

Commercial Paper 750 9% 0 0% 0 0% 770 5% 3610 22%

HDFC Ltd. KFW 11 0% 10 0% 0 0% 0 0% 0 0%

NHB Refinancing 2,777 34% 3,959 39% 3,771 31% 2048 15% 2644 16%

Fixed Deposits 1,292 16% 1,462 14% 1,505 13% 1458 10% 1526 9%

Total 8,216 100% 10,244 100% 12,018 100% 14,046 100% 16,568 100%

Cost of Funds 9.19% 9.42% 8.65% 7.48% 7.22% Gearing (times) 11.6 12.4 10.8 10.24 9.92 Source: Company data, ICRA research

GRUH enjoys good financial flexibility with access to diverse funding sources at competitive rates of interest. While the

company’s lower cost of funds has been supported by the relatively lower rate of refinance from NHB under the Rural

Housing Fund (RHF), it did not avail any refinance from NHB in FY2018. The company’s low cost of borrowings was

supported by the lower cost of short-tenure bank borrowings and commercial paper. Further, as a measure of prudence,

GRUH maintained excess liquidity by raising funds through the commercial paper route in H1 FY2019 as the market faced

liquidity pressure. Subsequently, the company replaced excess shorter-tenure borrowings with longer-tenure borrowings to

support the asset-liability mismatches. As on September 30, 2018, around 45% of GRUH’s borrowings were through market

borrowings, ~16% in the form of NHB refinance, 30% from banks and the balance 9% in the form of fixed deposits and

other sources.

Relatively high ALM gaps; however, adequate unutilised bank lines and cash balances result in comfortable

liquidity

GRUH’s reliance on short-term funds, while resulting in lower cost of funds, results in relatively high ALM gaps. Thus, the

company would need to replace a part of the short-term debt with long-term borrowings to reduce the refinancing risk

given the prevailing volatility in debt markets. ICRA takes comfort from the management’s stated policy of maintaining

adequate unutilised bank lines and cash balances. The company had liquidity support of Rs. 5286 crore comprising bank

loan sanctions worth Rs. 1650 crore and bank deposits worth Rs. 3636 crore as on September 30, 2018. While GRUH has

been able to manage the asset-liability maturities thus far, the same would be a key monitorable given the prevailing

liquidity conditions in the market. However, ICRA takes comfort from GRUH’s financial flexibility given that a significant

proportion of the portfolio qualifies for priority sector lending.

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GRUH Finance Limited

BUSINESS & FINANCIAL OUTLOOK

The company announced a merger with Bandhan Bank Limited on January 07, 2019. ICRA is closely monitoring the developments regarding the same.

EXHIBIT 9

Parameters ICRA’s Comments

Portfolio Growth and Diversification

ICRA expects an overall portfolio growth of 20-25% going forward, given that the merger with Bandhan Bank Limited would enable GRUH to scale up its business and expand to newer geographies (primarily in eastern India where Bandhan has a strong presence).

Net Profitability ICRA expects some pressure on profitability, going forward, with competitive pressure on yields. However, with GRUH’s cost of funds being low, the company is expected to maintain net profitability at similar levels.

Capitalisation and Capital Requirement

The company’s capitalisation profile is expected to remain comfortable supported

by strong internal accruals. ICRA estimates that at the current level of growth and

internal capital generation, GRUH’s capital requirements will be low.

Asset Quality

Although the company’s asset quality has seen some decline on account of

transitioning to IndAS and with the increased share of self-employed borrowers, it

has remained under control. ICRA expects the asset quality to remain stable given

the company’s prudent lending and monitoring practices.

Liquidity

The company’s well-diversified borrowing mix and long-standing presence in the

market enable it to raise funds with ease; ICRA expects the liquidity profile to

remain comfortable.

PROMOTER AND MANAGEMENT PROFILE

Housing Development Finance Corporation Limited (HDFC) was a majority shareholder with ~58% shares as on September 30, 2018. It is India’s premier housing finance entity and has been in existence for 40 years. With a presence in bank ing, insurance and asset management, the HDFC Group is an important part of the Indian financial services sector. HDFC reported a total income of Rs. 21,209 crore in H1 FY2019 on an asset base of Rs. 4,27,011 crore (as on September 30, 2018) compared with a total income of Rs. 17,297 crore in H1 FY018 on an asset base of Rs. 3,58,288 crore (as on September 30, 2017). The company’s PAT stood at Rs. 4,657 crore in H1 FY2019 compared with Rs. 3,403 crore in H1 FY2018.

However, as per the share exchange ratio for the amalgamation of GRUH Finance Limited with Bandhan Bank Limited,

GRUH’s shareholders would receive 568 shares of Bandhan for every 1,000 shares held by them. Consequently, HDFC’s

shareholding would reduce to ~15% (in the combined entity) from 57.8%.

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GRUH Finance Limited

Annexure I: Past Financials

PROFIT & LOSS ACCOUNT Mar-16 Mar-17 Mar-18 Sep-18

Interest Income (Net of Business Origination Costs and incl. processing fees)

1,216.3 1,428.7 1,609.3 902.2

Interest Expenses (including Preference Dividend) 807.4 919.6 982.5 553.2

Net Interest Income 408.8 509.1 626.9 349.0

Non-interest Income 47.4 46.7 63.5 30.5

Operating Income 456.2 555.8 690.4 379.5

Operating expenses 72.8 86.5 95.1 65.6

Operating Profits 383.5 469.3 595.4 313.9

Provisions including NPA provisions 21.8 27.3 33.3 12.2

Profit Before Tax (before extraordinary items) 361.7 442.0 562.1 301.7

Profit Before Tax (PBT) 361.7 442.0 562.1 301.7

Tax 118.1 145.4 199.4 81.1

Profit After Tax (PAT) 243.6 296.7 362.7 220.6

SUMMARY ASSETS

Net Hire Purchase/ Loan/ Lease Assets 11,143.6 13,284.6 15,619.9 16,534.0

Investments - Short Term Surpluses 142.9 158.1 153.1 209.8

Cash & Bank Balances 85.7 71.7 73.1 1459.0

Advance Tax paid 29.8 29.7 30.4 32.3

Other Current Assets 26.1 28.3 79.0 81.9

Net Fixed Assets 14.6 13.7 15.4 15.3

Total Assets 11,442.6 13,585.9 15,971.0 18,332.0

Off-balance sheet receivables 0.0 0.0 0.0 0.0

Total Managed Assets 11,442.6 13,585.9 15,971.0 18,332.0

SUMMARY LIABILITIES

Equity Share Capital 72.7 72.9 73.1 146.5

Reserves 762.6 1,040.3 1,307.8 1,515.3

Net Worth 835.3 1,113.2 1,380.9 1,661.8

Total Borrowings (including Preference Shares) 10,238.4 11,991.8 14,046.0 16,568.0

Interest Accrued but not due 89.5 128.8 107.1 0.0

Provisions for Tax 0.0 0.0 0.0 0.0

Other Current Liabilities & Provisions 220.8 229.2 290.1 144.4

Deferred Tax Liability 58.6 123.0 156.4 -42.2

Total Liabilities 11,442.6 13,585.9 15,971.0 18,332.0 Source: Company, ICRA research; Note: Amounts in Rs. crore

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GRUH Finance Limited

COMMON SIZE STATEMENTS Mar-16 Mar-17 Mar-18 Sep-18

PROFIT & LOSS ACCOUNT (% of Operating Income)

Net Interest Income 89.6% 91.6% 90.8% 92.0%

Non-interest Income 10.4% 8.4% 9.2% 8.0%

Operating Income 100.0% 100.0% 100.0% 100.0%

Operating expenses 16.0% 15.6% 13.8% 17.3%

Operating Profits 84.0% 84.4% 86.2% 82.7%

Provisions including NPA provisions 4.8% 4.9% 4.8% 3.2%

Profit Before Tax (PBT) 79.3% 79.5% 81.4% 79.5%

Tax 25.9% 26.2% 28.9% 21.4%

Profit After Tax (PAT) 53.4% 53.4% 52.5% 58.1%

SUMMARY ASSETS (% of Total Assets)

Net Hire Purchase/ Loan/ Lease Assets 97.4% 97.8% 97.8% 90.2%

Investments - Short Term Surpluses 1.2% 1.2% 1.0% 1.1%

Cash & Bank Balances 0.7% 0.5% 0.5% 8.0%

Advance Tax paid 0.3% 0.2% 0.2% 0.2%

Other Current Assets 0.2% 0.2% 0.5% 0.4%

Net Fixed Assets 0.1% 0.1% 0.1% 0.1%

Total Assets 100.0% 100.0% 100.0% 100.0%

Off-balance sheet receivables 0.0% 0.0% 0.0% 0.0%

Total Managed Assets 100.0% 100.0% 100.0% 100.0%

SUMMARY LIABILITIES (% of Total Liabilities)

Equity Share Capital 0.6% 0.5% 0.5% 0.8%

Reserves 6.7% 7.7% 8.2% 8.3%

Net Worth 7.3% 8.2% 8.6% 9.1%

Total Borrowings (including Preference Shares) 89.5% 88.3% 87.9% 90.4%

Interest Accrued but not due 0.8% 0.9% 0.7% 0.0%

Provisions for Tax 0.0% 0.0% 0.0% 0.0%

Other Current Liabilities & Provisions 1.9% 1.7% 1.8% 0.8%

Deferred Tax Liability 0.5% 0.9% 1.0% -0.2%

Total Liabilities 100.0% 100.0% 100.0% 100.0% Source: Company, ICRA research

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GRUH Finance Limited

KEY FINANCIAL RATIOS Mar-16 Mar-17 Mar-18 Sep-18

OPERATING RATIOS

Yield on Average Loans (Net of BO Costs) 12.0% 11.6% 11.1% 11.2%

Yield on Average Investments 10.1% 8.8% 9.0% 0.0%

Yield on Average Earning Assets (Net of BO Costs) 11.9% 11.5% 11.0% 10.5%

Cost of Average Interest-bearing Funds 8.7% 8.2% 7.5% 7.2%

Gross Interest Spread 3.3% 3.4% 3.6% 3.3%

PROFITABILITY RATIOS

Interest Earned / Average Assets 11.9% 11.5% 11.0% 10.5%

Interest Expenses / Average Assets 7.8% 7.3% 6.6% 6.4%

Net Interest Margin/Average Assets 4.0% 4.1% 4.3% 4.0%

Fee based Income/Average Assets 0.46% 0.37% 0.43% 0.35%

Operating Expenses /Average Managed Assets 0.8% 0.8% 0.7% 0.8%

Operating Profit / Average Assets 3.72% 3.75% 4.03% 3.64%

Provisions /Average Managed Assets 0.2% 0.2% 0.2% 0.1%

Profit Before Tax / Average Assets 3.5% 3.5% 3.8% 3.5%

Tax / Profit Before Tax 32.7% 32.9% 35.5% 26.9%

Profit After Tax / Average Assets 2.4% 2.4% 2.5% 2.6%

Profit After Tax / Average Managed Assets 2.4% 2.4% 2.5% 2.6%

Profit After Tax / Average Net worth 31.5% 30.4% 29.1% 29.0%

EFFICIENCY RATIOS

Fee Based Income/Operating Expenses 56.2% 47.6% 58.2% 46.5%

Operating Cost/Operating Income 16.0% 15.6% 13.8% 17.3%

CAPITALISATION RATIOS

Net Worth/ Total Assets 7.30% 8.19% 8.65% 8.98%

Total Debt / Net worth 12.36 10.89 10.24 9.92

Net NPA/Net worth 1.24% 0.00% 0.00% 1.08%

Capital to Risk Weighted Assets Ratio 17.82% 18.32% 18.90% 18.12%

Tier I Capital to Risk Weighted Assets Ratio 16.13% 16.82% 17.68% 16.99%

ASSET QUALITY

Gross NPA/Gross Advances 0.32% 0.31% 0.45% 0.88%

Net NPA/Net Advances 0.09% 0.00% 0.00% 0.11%

COVERAGE RATIOS

PBIT/ Total Interest 144.80% 148.06% 157.21% 154.53% Source: Company, ICRA research; Note: Amounts in Rs. crore; All ratios as per ICRA calculations

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GRUH Finance Limited

Annexure II: Details of Rated Facility

Instruments Amount – Rs. crore Rating Long-term Debt Programme 5,750.00 [ICRA]AAA@

Subordinated Debt Programme 35.00 [ICRA]AAA@

Commercial Paper Programme 7,500.00 [ICRA]A1+

Fixed Deposits Programme NA MAAA@

Total 13,285

@ under rating watch with negative implications

Links to applicable criteria:

Rating Methodology for Housing Finance Companies

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GRUH Finance Limited

RELATIONSHIP CONTACT

L. Shivakumar +91-22-6114 3406 shivakumar@icraindia.com

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services

companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited

Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit

Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.

For more information, visit www.icra.in and www.icraresearch.in

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GRUH Finance Limited

ICRA Limited

Corporate Office Building No. 8, 2nd Floor, Tower A; DLF Cyber City, Phase II; Gurgaon 122 002 Tel: +91 124 4545300 Email: info@icraindia.com Website: www.icra.in

Registered Office 1105, Kailash Building, 11th Floor; 26 Kasturba Gandhi Marg; New Delhi 110001 Tel: +91 11 23357940-45

Branches Mumbai + (91 22) 24331046/53/62/74/86/87

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