IDFC

February 11, 2022 The Manager – Listing Department The Manager – Listing Department National Stock Exchange of India Limited BSE Limited Exchange Plaza, 5th Floor, 1st Floor, P.J. Towers, Bandra‐Kurla‐Complex, Bandra (East), Dalal Street, Mumbai ‐ 400 051 Mumbai ‐ 400 001 NSE Scrip Code: IDFC BSE Scrip Code: 532659 Sub: IDFC Limited – Presentation on Q3FY22(Quarter and nine months ended December 31, 2021) Dear Sirs, Pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find attached a copy of the presentation on the financials for the quarter and nine months ended December 31, 2021. This is for your information and records Thanking you, Yours faithfully, For IDFC Limited Mahendra N. Shah Company Secretary Encl.: A/a IDFC LIMITED – CONSOLIDATED INVESTOR PRESENTATION – Q3 FY22 FEBRUARY 11, 2022 INDEX 1. IDFC consolidated financials 4 2. IDFC FIRST BANK 8 3. IDFC AMC 18 Applicability of Ind As ✓ Financials of IDFC Ltd & all its group companies (except IDFC FIRST Bank) have been prepared in accordance with the Companies (Indian Accounting Standards) Rules , 2015 (Ind As) ✓ IDFC FIRST Bank has submitted “Fit for consolidation” financials approved by the Audit Committee & reviewed by KPMG 5 Recent updates ✓ Citigroup Global Markets India Private Limited appointed as Investment Banker to divest mutual fund business of IDFC ✓ Mr Anil Singhvi appointed as chairperson of IDFC Board ✓ “In‐principle” approval by Boards of IDFC and IDFC FIRST Bank to merger ‘IDFC’ and ‘IDFC FHCL’ with ‘IDFC FIRST Bank’ subject to necessary approvals. Also, committees constituted by Boards of IDFC and IDFC FIRST Bank to work on terms of proposed merger, including finalizing the scheme, valuation, hiring advisors etc. as required ✓ Shareholders approve scheme of amalgamation of IDFC Alternatives Limited, IDFC Trustee Company Limited and IDFC Projects Limited (wholly owned subsidiary Companies) into IDFC Limited ✓ Ms. Anita Belani appointed as independent director on IDFC Board ✓ DAM Capital Advisors appointed as Investment Banker to divest our stake held in two joint ventures with state governments 6 Consolidated PAT All figures in INR Crore Particulars Q3FY 22 9MFY22 FY21 IDFC Standalone PAT 14.60 18.66 8.87 Add: profit of Subsidiaries Profit of AMC 46.08 1 39.28 1 44.02 Profit of other subsidiaries 7 9.89 8 8.48 43.36 Profit of subsidiaries 1 25.97 227.76 1 87.38 Add: Profit from associates, other adjustments IDFC FIRST Bank* 88.11 (139.42) (240.98) Others/other adjustments ( 4.95) (13.73) (6.22) Total Profit from associates and other adjustments 83.16 (153.15) (247.20) IDFC standalone PAT + Profit of subsidiaries + Profit from associates 223.74 93.27 (50.95) Less: Dividend elimination 91.09 91.09 61.62 Consol PAT 132.65 2.18 (112.57) * Under Ind AS 7 Bank At a Glance (as of 31 December 2021) Profitability NII & NIM% Fee & Other CASA Customer Q3 FY22 Q3 FY22 Income Q3 FY22 Ratio (%) Deposits Core Operating Profit NII Rs. 745 Cr 54% (Y-o-Y) Rs. 2,580 Cr 51.59%(51.28%) Rs.85,818 Cr 36% (Y-o-Y) Rs. 744 Cr Profit After Tax % of Total Deposits 11% (Y-o-Y) 28% (Y-o-Y) Rs. 281 Cr NIM% 117% (Y-o-Y) 5.90%1 (5.76%) Funded Assets Retail Book Asset Quality Capital Liquidity Adequacy Average LCR (%) Ratio (%) GNPA % Q3 FY22 3.96% (4.27%) Retail Mix: 62%2(59%) Rs. 1,22,219 Cr 28% (Y-o-Y) NNPA % 15.38% (15.60%) 149% (174%) 11% (Y-o-Y) 1.74% (2.09%) Home Loans Growth PCR% 44% (Y-o-Y) Reg. Requirement: 11.5% Reg. Requirement:100% 57%3(52%) 1. For one large telecom company, where the interest income was accounted on cash basis, the NIM% of 5.90% excludes interest income pertaining to prior periods. Including the same NIM% for Q3 FY22 is 6.18%. 2. The Bank has reclassified Commercial Banking Loans separately from this quarter. Including the same, Retail and Commercial Banking will be 70% of the gross funded assets 3. Including Technical write-offs and Excluding one large toll accounts, where we expect no material economic loss, the PCR would have been 75% () Figures in brackets are for the sequential quarter unless specified otherwise. 9 Highlights of Q3 FY22 Results Earnings • NetProfit grew by 117% YoYbasisto reach Rs. 281 crore inQ3-FY22 • Core operating profit (excluding trading gains) grew by 54% YOY toreach Rs. 745 crore • NII grew by 36% on a YoY basis to reach Rs. 2,580 crore in Q3-FY22. NIM stood at 5.90% excluding interest income pertaining to prior period for one telecom account.Includingthe same, NIMisat6.18% for the quarter. • Feeand Other Income grew by 13% QoQ and28% YoYtoreach Rs. 744 crore inQ3 FY22 • Core operating income(excludingtradinggains)grew by 34% YOY to Rs. 3,324 crore inQ3-FY22 • Provisions other than taxwere lower by32% Y-o-Ybasisat Rs.392 crore inQ3-FY22 Deposits • CASA balance: Grew by 18% YoYbasisto reach Rs. 47,859 crore ✓ CASA ratio:51.59% asof Dec 31, 2021, ascompared to 48.31% asof Dec 31, 2020 ✓ Avg. CASA Ratio:50.54% ason Dec 31, 2021, ascompared to44.66% ason Dec 31,2020 • Customer Deposits:Grew by 11% YoYtoreach Rs. 85,818 crore 10 Highlights of Q3 FY22 Results Funded Assets&Asset Quality • Funded Assets: Grew by 11% YoYtoreach Rs. 1,22,219 crore ✓ Retail Loan and Commercial Finance grew by 26% Y-o-Y to reach Rs. 86,052 crore, primarily driven by growth in Home Loans whichgrew by44% YOY • Asset quality at Bank Level: GNPA and NNPA reduced sequentially by 31 bps and 35 bps to reach 3.96% and 1.74% respectively Gross and Net NPA of Retail and Commercial Financereduced by 53 bps and37 bpsrespectively ✓ PCR increased from 52.06% as at Sept 30, 2021 to 57.06% at December 31, 2021 in order to strengthen the balance sheet. (67% includingtechnicalwrite-off) ✓ Collection Efficiency: Early bucket collection efficiency in Retail surpassed Pre-COVID levels for both urban and rural retail loans CapitalAdequacy Ratio&Liquidity • CapitalAdequacy Ratio:Strong at15.38% withCET-1 Ratioat14.83% • Average Liquidity Coverage Ratio(LCR): Strong at149% for Q3-FY22. 11 We are happy to say that the Bank is performing well on the guidances given at the time of the merger. Dec-18 Dec-21 Particulars Guidance for FY24-FY25 (At Merger) Latest quarter C Net-worth Rs. 18,736 Cr -- Rs. 20,649 Cr A P I CET –1 Ratio 16.14% >12.5 % 14.83% T A Capital Adequacy (%) 16.51% >13.0 % 15.38% L CASA Deposits Rs. 5,274 Cr -- Rs. 47,859 Cr L 30% (FY24), CASA as a % of Deposits (%) 8.68% 51.59% I 50% thereafter A Average CASA Ratio (%) 8.39% -- 50.54% B I Branches (#) 206 800-900 599 L I CASA + Term Deposits<5 crore (% of Customer Deposits) 39% 85% 87% T I Certificate of Deposits Rs. 22,312 Cr <10% of liabilities Rs. 6,947 Cr E S Quarterly Avg. LCR (%) 123% >110% 149% 12 We are happy to say that the Bank is performing well on the guidances given at the time of the merger. Dec-18 Dec-21 Particulars Guidance for FY24-FY25 (At merger) Latest quarter Retail and Commercial Book Rs. 36,927 Cr Rs. 100,000 Cr Rs. 86,052 Cr (27%) Retail and Commercial Book as a % of Total Funded Assets 35% 70% 70% Wholesale Funded Assets1 Rs. 56,770 Cr < Rs. 40,000 Cr Rs. 29,697 Cr (-14%) A -of which Infrastructure loans Rs. 22,710 Cr Nil in 5 years Rs. 8,051 Cr (-31%) S S Top 10 borrowers as % of Total Funded Assets (%) 12.8% < 5% 4.3% E GNPA (%) 1.97% 2-2.5% 3.96% T S NNPA (%) 0.95% 1.1.2% 1.74% Provision Coverage Ratio4(%) 53% ~70% 67% E A Net Interest Margin (%) 3.10% 5-5.5% 5.90%3 R Cost to Income Ratio2(%) 81.56% 55% 77.59% N I Return on Asset (%) -3.70% 1.4-1.6% 0.66% N Return on Equity (%) -36.81% 13-15% 5.59% G S 1.ExcludingSecurityReceipts,LoanconvertedintoEquity,RIDFandPTC. 2.ExcludingTradingGains 3.Excludinginterestincomepertainingtopriorperiodforonetelecomaccount.Includingthesame,NIMisat6.18%forthequarter 4.Includingtechnicalwrite-offs. EarningsforDec-18andDec-21areforthequarter.()bracketsrepresentYoYgrowth 6 13 Key Strengths of IDFC FIRST Bank 1.Vision: The summary of our vision statement can be captured in three words “Ethical, Digital and Social Good”. We believe ethical banking is at the coreofeverythingwedo.Digitalishowwedoit.Andwebelieveourbusinesshastocontributetolargersocial-good. 2. Customer First approach We are built on the foundation of customer-first principles. We believe in being transparent and not in billing the customer fees or charges in small bits and pennies through fine-prints. For instance, unlike common market practice in India and elsewhere, we do not charge non-home branchcharges,SMSupdatefees,IMPSfees,Annualcardfeesetc. We were the first universal bank to offer monthly interest credit for savings accounts. In credit cards, we were the first bank to introduce low, dynamic pricing, zero interest rate on cash withdrawal till billing date, lifetime Free credit cards and so on. Similarly, in every product we launch, whether current accounts, fleet cards or wealth management, we are bringing something new and customer-first special to the market. Thus, there are many “firsts” we have introduced to the industry. On the lending side, we are attractively priced like regular mainstreambanks. 3.Corporate governance Eminent, qualified and experienced Board of Directors. All committees are headed by independent directors except CSR which is headed by theMDandCEO.Wesaythingsastheyare,withtransparentcommunication,bothinternalandexternal,anddetailedinvestorpresentation. 14 Key Strengths of IDFC FIRST Bank 4.Strong capitaladequacy Capital Adequacy isstrongat15.38% with CET-I Ratioof14.83%ason December 31, 2021. Wealways keep our capital atlevelssignificantly higherthantheregulatoryrequirements. 5.Strong Depositsbusiness Wehaveastrong,stableandgrowingdepositsfranchisewithastrongpan-Indiabranchnetworkof599branches.Forinstance,wegrewour retail deposits by a whopping Rs. 29,970 crores even in the COVID affected year FY 20-21. We can comfortably grow deposits depending on requirements,basedonourstrongcustomerfocus,customer-firstproducts,technologyfocusandourstrongbrand. 6.Strong Liquidity The Bank is conservative in liabilities management, and always maintains a strong Liquidity Position. The Average LCR for Q3 FY22 was 149%.Evenduringthepeakoftheonce-in-a-centuryCOVIDcrisiswecomfortablycruisedthroughthesituationwithhighLCRlevelsbecause weproactivelyplannedourliquiditybeforethecrisis. 7.Improvingassetqualityandstrongriskmanagementpractices We have a track record of maintaining high asset quality with Gross NPA of ~2% and net NPA of ~1% (including Capital First and IDFC Bank experience) for close to a decade and we are confident of returning to the same metrics soon on the retail loans side. Retail Gross and Net NPAreducedto2.92%and1.28%inQ3FY22. Key indicators oftrends suchaschequebounces,collections,recovery,vintageanalysis,indicatethatGross andNetNPAwould reducefrom hereontoreach2%and1%respectively. 15 Key Strengths of IDFC FIRST Bank 8.Legacywholesaleaccountissueslargelybehindus Over the last three years, we have decisively dealt with, and accounted for almost all legacy infrastructure and corporate accounts. The qualityofincrementalcorporateloanshasbeenexcellentinthelastthreeyears. 9.Contemporary Technology The bank continues to invest in laying a strong, modular and contemporary technology architecture that will help the bank to simultaneously enable efficiency, resilience, and growth. Our newly launched mobile app based on these technologies is top rated and provides several unique services and experiences to our customers. The Bank continues to strengthen its superior capabilities of predictive analyticsintheareaofcreditunderwriting,portfoliomanagement,collectionstrategy,fraudriskmitigationandothersuchareas. 10.Strong uniteconomicsonanincrementalbasis Our retail lending is giving us strong ROE of 18 to 20% on an incremental basis. Its not hard to see how. The NBFC, whose business is now subsumed in the bank was posting ROE of 15% and rising, with ~9% cost of funds. Therefore, with cost of funds now under 5%, we can comfortablygenerateROEof~18to20%onretaillending.Eventhoughwehaveadditionallystarteddoinglessermarginproductslikeprime homeloansandnewcarloans,theoverallreturnsarestrongbecauseoflowercostoffunds. Currently, we are incurring cost of legacy borrowing of the DFI background @ 8.7% for Rs. 26,163 crores of borrowings. Further, since the bank is in set-up stage, we are incurring cost of launching/scaling many new businesses. These factors are masking these strong underlying economicsandROE,butthiswillgetaddressedinduecoursewithscaleandrepaymentoflegacyliabilities. 16 Key Strengths of IDFC FIRST Bank 11.Diversifiedbusinesslines We are a full-service bank. Our lending is diversified over millions of customers and over many business lines including Home Loans, Loan against property, business loans, gold loans, credit cards, small business working capital loans, bank guarantees, trade finance, etc. No business except wholesale loans are > 15% of the overall loan book. Similarly, on the liabilities and fee businesses side, we have a complete array of deposits, payment products, Fleet card, wealth management, distribution of insurance, mutual funds etc. We provide high quality corporatebankingservices andCashmanagementsolutions. 12.Strong growth opportunities In virtually all our businesses, across assets, deposits, and fee businesses, we have huge scope for growth. India is hugely underserved in financial services. Our opportunities for growth have increased substantially as we have started providing prime low-risk prime home loans andnewautoloanswherethemarketislarger. 13.SuccessfulTrackrecord The senior management has a track record of turning around and building successful institutions. Our senior management earlier turned a loss-making real-estate financing NBFC and converted it to a large diversified highly profitable institution with significant increase in shareholdervalue. 14.Anemployeefriendlyorganisation We believe in meritocracy. We provide our employees with growth opportunities, empowerment, training, digital tools and capabilities to be able to make a difference. For employees affected by COVID wave 1, wave 2 and currently Omicron, we offer the most generous COVID welfareprogram. 17 Performance Summary: Q3’22 IDFC MF QAAUM (INR. Cr) 3.3% ▪ IDFCAMCQAAUMgrew3.3%YOY 1,25,119 • Q3’22QAAUMincreased3.3%YoYtoINR1,25,119Cr 1,21,081 • Q3’22QoQAAUMwaslargelyunchangedVsQ2’22(-1.0%) • IDFCAMC’smarketsharewasat3.3% ▪ Financialoutcomes • Strong income growth, and operating leverage drove YoY Revenue growth of 7.6%, and PAT grew by 12.8%, with Q3’22 PATatINR46.1Cr • Sequential PAT was largely unchanged at 46.1 Cr vs. 46.7 Cr in Q2’22 Q3 FY21 Q3 FY22 1. QAAUM = Quarterly Average Assets Under Management 2. AUM data source: ICRA MFI Explorer 19 Equity AAUM crossed INR 30K Crores Equity QAAUM (INR. Cr) 22.8% 31,471 25,630 Q3 FY21 Q3 FY22 1. Equity AUM includes Equity and Hybrid schemes as per SEBI definition 2. AAUM: Average Assets Under Management 20 AUM gains in Non-Cash Debt Category Portfolio credit rating distribution1 Fixed Income QAAUM (INR. Cr) IDFC Industry (1.9%) 0.3% 95,451 93,647 4.5% 12,970 10,387 82,482 83,261 99.7% 95.5% Q3 FY21 Q3 FY22 AAA and AAA equivalent Others Debt (Non- Cash) Liquid/ Cash 1. As of December 31, 2021 Industry data includes top 15 AMCs excluding IDFC Source: ICRA MFI explorers 21 Financial Performance | Q3’22 vs Q3’21 YoY growth • Revenue growth of ~7.6% and overall margin In INRCr Q3’22 Q3’21 (%) improvement of +2.6bps YoY AAUM (QAAUM) 125,119 121,081 3.3% • Strong income growth, and operating leverage drove YoY PAT growth of ~13%; Q3FY’22 PAT at Total Income 108.4 100.7 7.6% INR46.1 Cr Income from operations 103.7 92.5 12.1% Other Income 4.7 8.2 Costs 46.1 46.3 (0.3%) PBT 62.2 54.5 14.3% PAT 46.1 40.8 12.8% MF Margin (bps) 32.7 30.1 +2.6 22 Financial Performance | Q3’22 vs Q2’22 QoQ growth • Largely unchanged AUM with ~2.8% growth in In INRCr Q3’22 Q2’22 (%) equity AUM AAUM (QAAUM) 125,119 126,335 (1.0%) • Fee income growth of ~5.7%, and margin improvement of +2.1bps QoQ Total Income 108.4 106.4 1.8% • PAT was INR 46.1 Cr, largely unchanged from Income from operations 103.7 98.1 5.7% last quarter Other Income 4.7 8.3 Costs 46.1 44.2 4.4% PBT 62.2 62.2 0.0% PAT 46.1 46.7 (1.4%) MF Margin (bps) 32.7 30.6 +2.1 23