17th Annual General Meeting

HDB Financial Services Limited

June 27, 2024

CORPORATE PARTICIPANTS:

Mr. Arijit Basu

Chairman

Mr. Venkatraman Srinivasan

Independent Director

Mr. Adayapalam Viswanathan

Independent Director

Ms. Smita Affinwalla

Independent Director

Dr. Amla Samanta

Independent Director

Ms. Arundhati Mech

Independent Director

Mr. Jayesh Chakravarthi

Independent Director

Mr. Jimmy Tata

Non-Executive Director

Mr. Ramesh G.
Managing Director and Chief Executive Officer

Mr. Jaykumar Shah

Chief Financial Officer

Ms. Dipti Khandelwal

Company Secretary

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SPEAKER SHAREHOLDERS:

Mr. K V Rao
Mr. Haren Parekh
Mr. C. S. Gopinath
Mr. Satyajit Karmakar

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Ms. Dipti Khandelwal:

Good Afternoon, members. I am Dipti Khandelwal, Company, Secretary of HDB Financial Services
Limited welcome you all to the 17th Annual General Meeting of HDB Financial Services Limited.
Pursuant to the provisions of the Companies Act and MCA Circulars, this meeting is being held
through two-way video conferencing and other audio-visual means. The live webcast of AGM is
available on the website of NSDL. The Register of Directors and the Key Managerial Personnel and
other documents referred in the notice of AGM are open for inspection electronically.

Members who wish to inspect such documents may send their request to me. While we have
provided the e-voting facility to members, the same is also available to the members during the
AGM. Members who have not yet cast their vote may cast the same during the AGM. The process
for e-voting is already provided in the notice of the AGM. Participation of members through video
conferencing and other audio-visual means is being reckoned for the purpose of quorum. We have
requisite quorum for the meeting.

Thank you very much, with this I now request Chairman Sir to proceed with the AGM proceedings.

Mr. Arijit Basu:

Thank you, Dipti. Good afternoon to all the shareholders on behalf of the Board of Directors. I, Arijit
Basu, Chairman of HDB Financial Services Limited, welcome you all to the 17th Annual General
Meeting of your Company.

As confirmed by the Company Secretary, the quorum for the meeting is present, I call this meeting
to order. Before we start the main proceedings of the meeting, I request my colleagues on the video
conference to please introduce themselves.

Mr. Venkatraman Srinivasan, please.

Good afternoon, everyone. My name is Venkatraman Srinivasan. I am an Independent Director of

the Company and Chairman of the Audit Committee, joining this meeting from Gulmarg. Thank you.

Good afternoon, everyone. My name is Adayapalam Viswanathan. I am an Independent Director of

the Company and Chairman of the Risk Management Committee, joining this meeting from my
home in Mumbai.

Mr. Arijit Basu:

Dr. Amla Samanta please.

My name is Amla Samanta. I'm an Independent Member of the HDB Financial Services Limited. I also
chair the Corporate Social Responsibility & ESG and Stakeholders Relationship Committee. I'm
joining from my office in Mumbai. I hope all of you stay well, take care. Thank you.

Mr. Arijit Basu:

Ms. Smita Affinwalla please.

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Good afternoon, everyone. This is Smita Affinwalla. I am an Independent Director of the Company. I
Chair the Customers Service Review Committee and I'm joining this meeting from my residence in
Bombay.

Mr. Arijit Basu:

Ms. Arundhati Mech please.

Good afternoon to one and all. My name is Arundhati Mech. I'm an Independent Director of HDBFS. I
Chair the Nomination & Remuneration Committee, joining this meeting from my residence in Chennai.
Thank you.

Mr. Arijit Basu:

Mr. Jayesh Chakravarthi, please.

Good afternoon, everyone. My name is Jayesh Chakravarthi. I am an Independent Director of the

Company and Chairman of the Information Technology Strategy Committee. I'm joining the meeting
from my residence in Bangalore.

Mr. Arijit Basu:

Mr. Jimmy Tata, please.

Good afternoon, everyone. My name is Jimmy Tata. I'm a Non-Executive Director of the company
and I am joining this meeting from my office in Worli, Mumbai.

Mr. Arijit Basu:

Mr. Ramesh G, please.

Good afternoon, everyone. My name is Ramesh Ganesan. I'm Managing Director & Chief Executive
Officer of the Company. I'm joining the AGM from HDB’s office in Mumbai. Thank you.

Mr. Arijit Basu:

Thank you. A very warm welcome to all the Directors attending the Annual General Meeting.

Apart from the members of our Board, we also have with us Mr. Jay Kumar Shah, the Chief Financial
officer of the Company. We also have the representatives of KKC & Associates and B.K. Khare &
Company, Joint Statutory Auditors. Mehta & Mehta, Company Secretaries, Secretarial Auditors and
the Senior Management Team are also attending this AGM through video conference.

I thank all the members for joining the meeting. This Annual General Meeting is held through video
conferencing in compliance with the directions of the Ministry of Corporate Affairs. The live webcast
of the AGM is available on the NSDL website. The Company has taken requisite steps to enable the
members to participate and vote on the items being considered in this AGM.

The notice convening this Annual General Meeting has been with you for quite some time. With your
permission, I take the notice as read.

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There are no qualifications, observations or comments in the Auditor's Report and Secretarial Audit
Report for FY 2023-24. The Auditor's report is taken as read.

It gives me immense pleasure to share with you the Annual Report for the FY 2023-24. Your
Company has strategically positioned itself to capitalize on the mega trends of increasing
financialisation, accelerating digitalization and shifting demographic patterns for sustained growth
and profitability while maintaining robust asset quality, customer engagement and operational
effectiveness.

You will be happy to note the improvement in the robust asset quality with a gross non-performing
asset ratio of 1.90% and net non-performing ratio of 0.63% as at March 31, 2024. This improvement
is a testament to our robust credit management practices including 360-degree credit assessment
and hybrid underwriting approach. A lot of credit also goes to our team who have executed very
well. Our Capital Adequacy Ratio stood at 19.25%, well above the regulatory requirements, providing
a solid foundation for future growth and expansion plans.

Our total revenue grew by more than 14.26% to ₹14,171 crores, driven by a healthy increase in our
loan book attributed to our focused efforts on diversified offerings and broadening the customer
pipeline. This coupled with efficient liability management through optimized borrowing strategies
and cost rationalization, especially in a time when interest rates have not been favourable, aided an
increase in operating profit by 25.78% to ₹3,305 crores and Profit After Tax rose by more than
25.59% to ₹2,461 crores.

Your Company performed well on both qualitative and quantitative parameters and remains
committed to striving for continued improvement in delivering value to all stakeholders. Your
Company has expanded its branch network to over 1,682 branches, I think one of the largest for the
NBFC sector, enhancing the reach and accessibility to customers across 31 States and Union
Territories. We achieved a healthy 28.75% growth in AUM; a clear indication of the trust and
confidence the customers have in our offerings. We maintained our strong credit rating of
AAA/Stable from both CRISIL and CARE. This reflects the Company's robust financial position, sound
risk management strategies and commitment to maintaining a healthy balance sheet.

Digitalization is central to our strategy and underpins our commitment for better customer
engagement and more efficient business process so that we can drive sustainable growth with
profitability. This enables us to provide a seamless experience and operational efficiency throughout
the customer journey. Our ongoing investments in technology have forged a robust digital
framework that provides analytical insight, enabling tailored financial solutions, efficient loan
processing, servicing and collection.

Till date, over 8 million customers have used the HDB on-the-go mobile app. Our digital channels
including the WhatsApp Bot and Chatbot handles approximately 50,000 customer queries every
month. Our CRM implementation has enabled efficient servicing of customer needs. We recognize
that customers expect seamless experiences across touch points and by integrating our digital and
physical channels we ensure consistency and continuity in customer engagement. On technology, I
would like to always mention that there is a scope to continually improve and the Company is
focused on that.

Our highly skilled and committed workforce is the driving force behind the business. The continuous
upskilling initiatives and domain expertise for employees across functions like credit underwriting,
risk management and collections have played a major role in the Company's journey. We value the

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contributions of our workforce and offer them a supportive and enabling work environment and
they have delivered a superbly in the last year.

The Company lays paramount emphasis on good corporate governance and culture that runs right
through the organization. The Board and senior management recognize that the tone has to be set
at the top and there should be effective communication to ensure that the message of good
governance is disseminated right to the front line. The Board and senior management are cognizant
of new risks that are emerging in the financial sector. For example, from new technologies, cyber-
crime and from an increasingly uncertain global scenario. Constant effort is made to understand
these risks and mitigate them.

We are committed towards fostering positive change and recognize the important role of businesses
in shaping the societal landscape. The Company firmly believes that the true measure of success
goes beyond profits. Success is all about contributing meaningfully to the wellbeing of the
communities the Company serves through purpose driven initiatives. 35 focused interventions, your
Company's CSR programs have positively impacted lives of over 1.34 lakhs individuals and touched
many more lives through a wide range of development activities.

On behalf of the Board of Directors and the senior management team, I would like to take this
opportunity to thank the regulatory authorities including the Reserve Bank of India, the IRDAI and, of
course, SEBI. I would also like to thank all our stakeholders for their continued faith in our abilities
and the unwavering support in all our endeavours. Last but not the least, I also thank our employees
for their dedication, hard work and commitment. Their efforts have been instrumental in propelling
the evolution and success of the Company. Thank you very much.

Ms. Dipti Khandelwal:

Thank you, Sir.

Mr. Mitesh Shah, Practicing Company Secretary, has been appointed as scrutinizer to scrutinize the
votes cast through e-voting. Since the AGM is held through video conferencing and other
audio/video means, the resolution mentioned in the notice convening this AGM have already put to
vote through remote e-voting. There will be no proposing and seconding of the resolution.

The name of shareholders who have registered as speaker shareholders will be announced one by
one. The speaker shareholder thereafter will be unmuted by the host. To start the discussion, the
shareholder is requested to click on the video button. If the shareholder is not able to join the video
for any reason, shareholder can speak through the audio mode. If there is connectivity problem at
speaker's end, we would ask the next speaker to speak at the meeting. Once the connectivity
improves, the speaker shareholder would be called again to speak after the other shareholders who
have registered and completed their turn. We request shareholders to kindly limit their speech to
three minutes per speaker. During the AGM if the member faces any technical issue, he may contact
the helpline number mentioned in the notice of the AGM.

Now, I would like to invite the speakers who have registered themselves as speaker to ask questions.
The replies shall be given after all questions have been asked.

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Mr. Arijit Basu:

Mr. K.V. Rao, please.

Okay. Good afternoon, everyone. Let me first at the outset congratulate Shri. Arijit Basu, Managing
Director & CEO – Mr. Ramesh G., other Directors and most importantly the senior management and
the employees of the Company for the stellar performance in the previous financial year ending
March, 2024.

I am happy to see the aggressive increase in the Assets Under Management and the significant
reduction in the gross and net non-performing assets and also good asset quality. Besides this, very
healthy profitability figures. So, let me congratulate you once again.

I have two questions to ask. One is, how are we placed in respect of the non-performing assets of
Stage 3 and it's provisioning? And the second question is, the final dividend proposed is ₹1 per
share, why not you evaluate increasing the dividend level?

That’s it. Good day to everyone.

Mr. Arijit Basu:

Thank you very much, Mr. Rao. Thank you. You can unmute, yes. May I request the next
shareholder, Mr. Haren Parekh, to please ask his question.

Thank you. So, I also would like to congratulate the Board of Directors and the management for an
excellent performance, growth in the assets and reduction in the NPA levels. And this time I've also
seen the Annual Report and was quite extremely satisfied with the content, which was a little
different than what has been shown in the past. It's very good. Thank you.

However, I have two or three questions which I just want to ask. And since Mr. Tata is also here as a
representative of the HDFC Bank. My questions are, one, is MUFG Bank a shareholder now; Point
Number 1? Point Number 2 is that last week there was an article in the newspaper saying that HDFC
Bank has yet to approve the IPO process and what is the reason for that? And the third thing is that
the dividend policy of HDFC bank, is a dividend pay-out ratio of 20% whereas HDB is at 10%. Though
there is an improvement from the last year, last year we were at 8% and now we moved up to 10%,
but the parent itself has dividend pay-out policy of 20% and why is that policy not getting
implemented at the subsidiary?

Thank you very much and all the best.

Mr. Arijit Basu:

Thank you. Thank you very much, Mr. Parekh. May I request the next shareholder, Mr. C.S. Gopinath
to please ask his question?

Yeah, okay. So, first, I would like to congratulate the CSR Committee of this Company for spending
₹31.3 crores which is over and above 2% statutory limit set by Ministry of Corporate Affairs. I hope
from next time you will also mention what is our contribution for uplifting Dalit, Pichhra and Adivasi,
you know, the slogan among the recent elections. And, please, keep doing on the CSR front.
Secondly, I also thank for giving during this year ₹2 interim dividend and ₹1 final dividend, which is
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50% above the previous year. So, I hope you will take care of the shareholders’ interests in the
coming days.

I have only two questions. In the Balance Sheet where I see the deferred tax asset, this year it is
₹939.95 crores and last year it was ₹1,000.87 crores. Is it due to the Income Tax regulations certain
assets are still not depreciated the way that they wanted? That I need clarity. And the second is, the
investments during this year jumped from ₹1,243.25 crores to ₹3,380.33 crores. I hope it is only a
period when you have already borrowed and you are yet to deploy the money in your loans. But,
otherwise, keeping the money in investments or in Mutual Fund as against lending may reduce the
profitability of the Company.

So, only these two small questions that I have that I would like to hear from the management. So,
thank you very much. Thank you. For a long time, I have not seen Mr. Jimmy. I am very happy to see
him on the video. Thank you, Sir.

Mr. Arijit Basu:

Thank you very much, Mr. Gopinath. I would now like to request Mr. Satyajit Karmakar to kindly ask
his question.

First of all, congratulations to the management for a stellar performance. I have basically two
questions. Given the current interest rate scenario, what is the outlook for borrowing costs and the
impact on earnings going forward? And my second question is, do you have any derivative positions
in your Balance Sheet? Thank you.

Mr. Arijit Basu:

Thank you very much, Mr. Karmakar.

Before I hand over to our MD & CEO, Mr. Ramesh, to take most of the questions, I’d just like to very
quickly summarize the questions that have come. One is relating to dividend, Stage 3 provisioning,
interest rate scenario, etc. There were two questions around the participation, whether MUFG is a
shareholder and on the permission from the bank for the IPO. So, no, MUFG is not a shareholder.
Regarding the IPO, whether the bank has taken a call, so as of now they haven't. But just to advise all
the shareholders present that the requirement which is based on the RBI guidelines, the RBI
guideline as on October 01, 2022 had stated that any Company/ NBFC which is in the upper layer
would need to list within 3 years. Which basically means that we need to list within September 30,
2025. Today we are in June, 2024 and just to reassure that there is sufficient time available for that.

With that, I hand it over to Ramesh to take it forward.

Mr. Ramesh G.:

Thank you, Chairman Sir. And thank you, first of all, to all the shareholders for joining today's
meeting. I'm sure you all have busy schedules and I'm grateful to you for joining today's meeting and
thank you for all the questions and thank you for your words of support. I think it means a lot to us
as employees of this Company when we receive words of appreciation from our shareholders. Thank
you so much.

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I'll take some of the questions that came, in no particular order. First, I want to clarify to one speaker
shareholder who spoke about the CSR. Yes, Sir, it's indeed a matter of fact that we exceeded 2%
requirement under law. However, any excess spending can be carried forward to the next year and
can be set off against the next year's requirement. So, as a Company we want to make sure that we
spend whatever is our CSR budget on goals which are primarily aligned to SDGs. So, basically, focus
of our Company is primarily on healthcare, education and poverty upliftment; all of which address
the segments that you're talking about, you know, where we are trying to bring more and more
Indians into the economic ecosystem. You know, healthcare costs and education costs for the poor
are the most and most of our initiatives are towards providing quality education and quality
healthcare at very affordable prices to our communities.

This other question which came from two speaker shareholders around dividend. I do understand
that our current pay-out ratio is just under 10% and one of the shareholder’s pointed out that HDFC
Bank’s pay-out ratio is almost 20%. I think what we're trying to do is really balance the pay-out with
our growth capital that we need. And given the overall macroeconomic environment, I think the
Board took a call to declare dividend pay-out to ₹3 this year, including interim dividend, as against
₹2 last year. So, we continue to have to play a balance on this. And the other thing that I'd like to tell
shareholders is that, today dividend is taxable for shareholders and the money retained in the
Company probably is more value accretive. But we will continue to play a balance and we will
continue to listen to all of you.

The third question was around NPA Stage 3 and provisioning. Our Stage 3 as of March 31, 2024
stood at 1.9% and this includes loans which are currently not 90 DPD but they are at some point of
time 90 DPD. So, gross Stage 3 that we reported is also the Gross NPA number of the Company. We
don't report two different numbers. The provision coverage of Stage 3 is about 67%, which is fairly
you'd agree, is a good number. 67% of the PCR, which is why the Net NPA is just about 0.6%. One of
the things that did happen through the year was that our credit cost, which is the P&L impact of all
the loans that don't get paid where we have to make a provision, declined to 1.35% of AUM as
compared to 2% in the prior year because of which the absolute provision that we have to carry was
less this year in absolute terms as compared to the prior year which is why there was a release and
which is why the deferred tax asset that we have is lower than last year. So, deferred tax asset is
primarily created because, you know, our provisioning policy is a little more accelerated or
conservative as compared to what is required under the Income Tax laws. So, either asset as an NPA
or asset is a write-off. If asset is a write- off, then the Income Tax department allows you to take the
charge in your P&L. But, however, if the asset is an NPA and not a write-off, there are rules. So, the
Income Tax rules and India's Accounting Standards that we follow don't exactly match. So, primarily,
the deferred tax asset is because of that difference in the Accounting Standards within the Income
Tax rules and the 35.20 that we follow.

There was also a question on borrowing costs. Across the system the borrowing costs have gone up.
We are very cognizant on that. But, however, I think as a Company we have a conservative
borrowing strategy. If you look at our balance sheet historically, we don't have a practice of
borrowing short and lending long. In fact, our commercial paper in our book is less than ₹1,000
crores as on March 31, 2024, which means that we're not really subjected to the vagaries of interest
rate movements. Typically, what we try and do is, match our assets and liabilities. So, if I'm going to
put out a 3-year loan today, I will try and match it with the 3-year liability today so that I can lock in
the spreads on the day I give the loan. I don't try and play the interest rate game. It's very difficult to
predict and depends on the number of global factors. So, we will continue to monitor this and which
also means that we might have to reprice incremental loans to customers. Also, some of our
customers are on floating rates where we can reprice their loans as and when our borrowing costs

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go up. So, we try and maintain a spread and minimize risks as far as our borrowing cost strategy is
concerned.

There was one more question on derivative positions and I'm going to ask my CFO to answer that
question. We have basically two types of derivatives. One is on account of external commercial
borrowing that we have taken. The second is because we have converted some of our floating rate
loans to fixed rate loans, so because of which there's a derivative that's being created.

Jay, would like to take that answer?

Mr. Jaykumar Shah:

Yeah. Thanks, Ramesh. So, just on that question which came from Mr. Satyajit. As Ramesh said, we
have two principal exposures. ECB we've had in the past and what we do there is, Sir, that whenever
we borrow something, if it's in foreign currency we make sure it's fully hedged. So, we don't take any
risk either on interest rates or on the currency. And it's been a strategy of the Company to make sure
we deal with our customers in Indian rupees and hence all our exposure, if we even borrow
externally, we convert it in Indian rupees. That's what we've done.

So, we have approximately ₹2,000 crores in that space. In addition to that, as we've been looking at
options to make sure we match fund, on the customer side there has been an opportunity for us to
look at our floating rate borrowings and convert it into fixed rate. So, that's a derivative position that
we hold for approximately ₹1,500 crores.

So, those are two positions that we hold. In terms of risk that it carries on the Balance Sheet is
minimal to none primarily because it is a fully hedged against the underlying.

Mr. Ramesh Ganesan:

Okay. Jay, there's also a question on investments of ₹3,380 crores in our Annual Report. Would you
like to take that?

Mr. Jaykumar Shah:

Yeah. So, on the investments, we have two principal components. One, which you see has a slight
difference from last year, is we've invested in government securities and these are actually held on
our books as ‘Held to maturity’. As some of you would have read newspapers in the last few weeks,
RBI is very focused on how do we maintain liquidity, making sure the liquidity coverage ratio in the
bank and NBFC is there and that is something that we've been very focused on and keeping money
aside for liquidity coverage ratio has been one of the reasons why we went ahead with government
securities, which is approximately half of this balance. The other half, as Mr. Gopinath rightly
pointed out, it's purely a liquidity measure as at a point in time which is amounts maintained in
Mutual Funds as of that date. That's the two components, yeah.

Mr. Ramesh Ganesan:

Thank you, Jay. I take this opportunity to thank our customers who have given us a chance to serve
them, our shareholders who have faith in us, our regulators for their ongoing guidance and my
fellow colleagues who give their best to the organization every day.

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On behalf of management and our employees, I'd like to thank each and every Board member. They
all have busy professional lives but I don't think I have ever encountered a situation where they've
not given us enough time in supporting the organization and giving the guidance. Thank you to all
the Board members. Thank you very much.

Mr. Arijit Basu:

Thank you, Ramesh. I thank all the shareholders for their presence today.

The e-voting facility will be enabled for the next 15 minutes for those members who have not yet
cast their vote. The results of the e-voting will be declared after the conclusion of the 17th AGM
within two working days and sent to the stock exchanges. The results will also be published on the
website of the Company. The proceedings of the AGM will be available on the website of the
Company.

I, now, declare this meeting as concluded. Thank you all very much.

(E-voting commences)

END OF TRANSCRIPT

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(This document has been edited to improve readability)

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