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MAHINDRA AND MAHINDRA FINANCE SERVICES LIMITED:

EMPOWERING RURAL CUSTOMERS IN INDIA

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Naresh Bhatt, branch- manager, Bijnor Branch, North India,

left vimla Devi,s office to drive to his
Mahindra and Mahindra Financial Services Limited rural branch office in Btj;;; .,I,ve never seen
@r)
anywhere in the world a place so beautiful," he remarled,
but his subordinate, Nand Kishore, did not hear
him' He was too worried about how to proceed with the process
of sanctioning Devi,s loan application,
which had already been rejected by another bank on the grounds
of lack of documentation and collateral.
Devi was the sole oy:ler
9f IWs. Triupati Automobiles, located in Bijnor, a rural part of North India 100
kilometres from Delhi. In business since 2002, the transport company
was quite popular in the region. Its
main customers were small-scale pharmaceutical companies in-and
u.orrni u;no.. o.ui also owned a
small piece of agricultural land. with about.l9
v:* of experience in the transportation (logistics)
business and anticipating a1 increase in profitability in th" g.o,iirg
pharmaceutical industry, she decided
to expand her transport business by buying two more commercial
rihi"l.. (Exhibit lr.
LOAN SANCTION WITH COMPETING PUBLIC SECTOR BANKS'RURAL
BRANCHES
Before approaching MF, Devi had applied for a loan from
the nearby branch of MyBank, a public sector
bank' that had a large, rural, nationwide netrvork, She was confident
that it would offer her a loan on the
' basis of her past business transaction records wittr ii. In December
20l2,she applied for a loan to buy two
commercial vehicles worth Rs1,285,000 (equivalent to
US$23,182), whicir'she needed immediately
because she had business commitments to transport goods
for new customers by January 2013. with all
the necessary legal documents in hand, she rrGa oit the requisite
loan application form, pledging her
J-9.ut collateral against the intended loan amount. The branch manager promised her that the loan would
be disbursed to her firm within a few days of purchase
ottrre u.rri"r.r.
A week later, officials of a third-parfy agency appointed by the bank
visited Devi,s office for verification
of the submitted documents. They crosi-checked her originui ura
ownership documents, inspected the
land and prepared a detailed report. Two weeks later, thI
bank branch manager phoned her to say that
because the land title was uncleir, she needed to pledge
torn" oit.. asset to provide collateral. Devi was
1
tn a pubtic sector bank, a maiority stake (i.e., more than 50 per cent) is hetd by the Govemment of tndia.

-
 Page 2 9B14A065

surprised because she had presumed that the bank would consider her previous business track record and
future business plan and not only her collateral. However, the branch manager told her that he had to
follow standard procedure for bank loans and there was nothing he could do but accept the third-parly
report. Further, he had little confidence in her business plan, especially her future cash flow projections,
and thus was not convinced that she would be able to repay the loan amount. Devi then called on Kishore
Jain, a dealer in the MF Automotive Division.

Jain: What happened? You were planning to buy two commercial vehicles from us, but I have not
heard from you since last month.
Devi: Yes, I still want to purchase vehicles from you, but my bank is refusing to give me a loan.
Jain: Devi, it is quite strange that they are refusing you a loan. I will personally suggest you meet
Bhatt, the MF's branch manager. MF is known for supporting rural customers, good customer
service and fast loan processing. I will recommend your case to them.

BACKGROUND OF MAHINDRA AND MAHINDRA FINANCIAL SERVICES LIMITED

Steered by Chairman and Managing Director Anand Mahindra, Mahindra & Mahindra (M&M), which
sold tractor and farming equipment and had deep penetration in rural India, was a $15.9 billion
multinational group based in Mumbai. It had won many awards and earned huge accolades in 2011, it
-
was featured on Forbes Global 2000 list and was named by Dun & Bradstreet the number one company in
the Indian automotive sector.

A strategic business unit within the group, MF was set up as a non-banking finance company (NBFC)
(Exhibit 2). Its product portfolio included vehicle loans, used vehicle financing, housing finance, personal
loans, fixed deposits, mutual fund distribution, insurance broking, gold loans and loans for construction
equipment (Exhibit 3). In 2013, about 40 per cent of the finance MF provided was for commercial
vehicles, 22 per cent was for tractors and the rest was for passenger vehicles.

The company began its operations in 1995 in Jaipur, Rajasthan, with 15 branches and 100 employees; its
year-end revenue was Rs500 million (US$8.4 million). Every day, MF's locally recruited rural employees
would go from one coflrmercial vehicle dealer to another, selling loans to an average of five to 10
customers. MF's efforts were so successful that it started expanding to all rural and semi-urban areas in
Rajasthan and other states as well. As commercial vehicle dealers started requesting that the company
grant loans to their customers, MF extended its presence all over India, so that by 2013 it had 648
branches providing the rural poor with easy access to financial services.

Given the country's vast and diverse culture and.geography, MF was faced with differences in rural
' consumer behaviour from one region to another. The company soon realized that it was not enough to
have aphysical presence but that it was also important to understand local traditions, rituals, customs and
culturai activitiei and to communicate with its customers in their own language or local dialect.2

As a result, the company changed its focus from product-based to customer-centric, designing products
customized to local needs and sold through local channels. Based on consumer insights and feedback
from employees, its product range and services differed across all rural geographies. Its customers were
primarily farmers, small traders and vehicle operators but also included some small and medium
enterprises (StfE). Thus, it broadened its portfolio from retail lending to SME lending. ln20l3, MF had
close to 6,600 employees and managed assets worth Rs103,290 million (US$I.71 billion). See Exhibit 4
for milestones in the company's history.
2
lndia has 16 officiat languages and 3,260 locat dialects.
 Page 3 9814A065

MF STRATEGIC BUSINESS MODEL

A RuralCompany

India is a land of contradictions: while it presents itself as a fast developing economy, with rising per
capita income and a large base of young people, there are 216 million pooipe6pte livinj in its rural areas.
MF provided loans to them, thus stimulating poverty alleviation, empowering tiem and-oreating equitable
opportunity in rural India.

MF's decision to focus on rural India was based on many factors. The rural poor were more likely to be
committed to repaying their loans since they valued the additional income generated by the commercial
vehicles MF financed and MF was the only company that gave them aicess to formal credit. The
management felt the company would have a greater impact by improving the quality and standard of life
of the rural poor, which constituted the most marginalized group in th- sociity. According to Ramesh
Iyer, managing director, MF's success could be traced to its "rural-ness": "A rurai-based finaice company
in India cannot just copy a strategy that worked elsewhere in the world or that was successful in wban
India; rather, [it] must strategize based on an in-depth understanding of rural customers and then
customize products to fit the indigenous rural poor focused model. . . . li is not just this one odd case
of
Devi that we're dealing with; we have similar rural customer profiles across India."

Positioning in the Strategic Gap

Typically, multinational companies and private banks focused on the top tier cities in India, where most
of the high net-worth individuals were based, to achieve the highesf margins. They were averse to
reaching out to rural markets, where they assumed the people hadlittle disposable inctme and no clear
assets to pledge as collateral, the essential criteria for loan disbursement. Mor"over, the rural poor
were
an unbankable population; that is, most ofthem did not have a bank account.

Traditionally, rural Indians used either rural-based public sector banks or individual moneylenders to fund
their financial needs. Local moneylenders offered loans readily but at a very high intereit rate of 36 per
cent per annum, while the banks lent money with more affordable interest rates of 10 per cent per annum
but required collateral' Some public sector banks had become more aggressive in increasing their
presence in rural lndia, lessening the dependence of rural people o, morreyleoders. However,
thJbanks
followed stringent guidelines when lending loans and relied heavily on collateral. The rate of interest MF
charged was lower than the traditional moneylenders but slightly higher than the banks. However, its
service quality was far superior to both. To reach out to rurai customers was a challenge because ihey
were scattered and more-dispersed compared to urban customers: in2013, about 70 to 80 per cent of
MF's customers were 50 to 100 kilometres away from its branch offices. MF employees met these
customers personally, and this face-to-face interaction improved customer service Oitivlry and helped
front-end employees gather the frst-hand information required to select the right customers and
understand their needs in order to develop customized loan solutions.

Empowering Rural Gustomers

MF-followed a unique indigenous business model that it called the "Earn and Pay" model. Unlike other
banks and NBFCs, MF relied on the objective and subjective evaluation of customers by its branch
managers and field executives, rather than outsourcing this job to a third party. Since marginal farmers
did not have any major assets, including records for the viry land tUey iittei or a crediihistory, risk
assessment was difficult, but MF did not want to turn away deservirg farmers and budding entrepreneurs.
Page 4 9814A065

To develop a credit risk profile, the branch manager assessed customer integrity and liability, as well as
the future cash flow from the vehicle for which the loan was taken. This unique business model was
socially inclusive as it helped customers with low incomes and at the bottom of the social pyramid to
grow by providing them loans based on their future earning capacities. As only a fraction of rural
customers could afford to approach moneylenders or satisff the bank loan conditions, most shifted to MF.
Iyer claimed that MF had developed intemal objective methods that were different than those of the
fraditional banking system:

Although we may not have the financial statements of a customer, we may have enough input and
understanding of the application of the product financed. We finance all the products tlat have
commercial use, so we do not focus only on the existing customer's cash flow ability, but also on
the ability of the product to eafll and pay. . . . The company has its own internal matrix. For
example, if a tractor is financed, we know that it can be used for, say, X area of a land for tilling
and thus what the agriculture output will be, resulting into how much the farmer will earn. After
deducting the farmer's liability from farm income, we can arrive at how much money a farmer
can afford to repay per month.

Over the years, MF had gained an in-depth knowledge of rural and semi-urban markets, which enabled it
to devise products according to customers' specific needs. Reworking its product portfolio and the
margins it generated was an important decision, as Iyer explained:

What we have is a multiproduct approach, like we know for sure that financing utility vehicles,
tractors, commercial vehicles and second-hand vehicles offers different yields. We look at a
product mix in which our margins can be protected. Normally, we work on minimum of 3 to 3.5
per cent return on an asset; therefore, we will keep revisiting our product mix to ensure that
margins are protected. We have been profitable since the beginning of our operations. (See
Exhibit 5a and 5b).

The biggest challenge was not only to reach out to rual customers and develop customized solutions that
were relevant and appropriate to their needs but also to follow up and devise appropriate control
mechanisms for recovery of loan repayments. Rangachari Balaji, MF's vice-president of marketing and
sffategy, emphasized that "We primarily operate on one side of the balance sheet, that is, the asset side.
Though lending might be easier, the challenge lies in loan recovery. Hence, it is imperative to have a
strong collection mechanism for sustained business success, especially when catering to the underserved
rural segments." Loan repayment was a complex issue because rural customers repaid loans mostly in
cash as they did not have bank accounts. MF used technology to prevent the chance that an employee
might pocket the cash. Immediately upon receiving a cash payment, employees had to generate a payment
acknowledgement receipt on a handheld technological device. This device, which was integrated with a
camera., biometric fingerprint reader, thermal printer, voice recorder, GPRS and LAN connectivity, had
been devised by MF to transform on-field executives into mini-branches to bridge the last-mile gap across
rural India. They could service rural customer product queries and loan tepayments. The data generated
by the device were stored in a centralized server. This process not only updated the company's central
server about the amount of payment received from the customer but provided a printed receipt as proof
that an account had been debited. This made the customer feel secure and generated tnrst.

The company categoizedtwo types of loan payment defaulters: circumstantial and intentional defaulters.
The majority were defaulters, those who were not able to repay due to uncontrollable circumstances, such
as an accident or illness. In this case, instead of repossessrng the vehicle, MF partnered with the customer
by providing time to deal with the difficulty. The company even took into account local macro-events that
could impact customers' monthly repaying capacity such as a bad monsoon season, poor crop production
 Page 5
9814A06s

or bad rcalization of crop prices. Unlike other financial companies, MF did not resort to legal
action
against the circumstantial defaulter but relaxed the payment pians and adjusted loan instalments
for the
coming year. This flexibility was a win-win solution foi both the company and its customers.
MF realized,
that if a customer whose vehicle was financed had a road accident ..r.rtting in vehicle
damage, this would
impact the customer's earnings and thus repayment ability. Its strategy of-diversi$ring into the insurance
business led to risk mitigation for both customer and company. foui years ago, 'Vff- furtt
diversified
into housing finance to address rural customers' needs for se-curity. ".
Intentional defaulters were eaming but not repaying loan amounts. In such instances, the company took
steps to repossess the vehicle at the earliest opportunity as any delay would lead to a drop in its
value and
thereby increase the loss. Employees had to be in continuoui with customers in order to
"o.*unication
assess the situation and take appropriate steps. This model of high interaction with customers was unique
to MF and a significant source of its business advantage

Further, MF differentiated between book entry loss and actual credit loss. For example, in a given
financial year, some circumstantial defaulters might show an outstanding amount on books, but the next
year they might start paying again, so the actual loss would be less than ihe book value
loss. This was an
important fundamental, specifically when the company was dealing with rural customers whose income
was cyclical. MF's actual credit loss was between 1.0 to 1.2 per cent of total loaned amount, which
compared favourably with its competitors.

Empowering Rural Employees

MF hired 9,700 local people to serve the rural areas where they lived. Iyer stated: "The company started
recruiting employees from local rural colleges. Eventually, these locatty recruited emptoyees gave
a
competitive advantage to Mahindra Finance by not only being well-versed in the locai languale and
consumer behaviour but also by being socially connected to the rural consumers as they betonlgeito
the
same society." Hiring local rural employees at the entry level resulted in a lowering of tire attriti,on
rate, a
perennial problem of this industry. Vinay Deshpande, chief personnel officer, saidl"This decision
r"up.d
two benefits: first, in many cases employees personally knew the customers as both belonged to the
same
village and thus the credit risk was reduced to a certain extent; and second, the employeeJ tended to stay
loyal as no one offers a better employment oppornrnity compared to us in these rurai arlas.,'

MF primarily followed a three-pronged strategy for recruitment referral hiring, which accounted for 70
per cent of its employees; and campus recruitrnent from graduate and rianagement colleges and
newspaper advertisements, which accounted for 30 per cent. The human ,i.o*.e. defartment
empowered local branches to hire candidates referred by existing employees and dealers. The company
typically visited 75 to 80 rural-based graduate colleges across thJ country in its recruitment drive d;i";
the graduation period of February and March. When manpower requirement was high, the company
also
used local newspapers advertisements as a recruitment iource. Ii also started aplroaching ,1s11-profit
organizations who were engaged in vocational training in rural areas. Aspirants wiie selecte-<l u..ordiog
to multiple criteria, such as an aptitude test, sales job orientation and possessing the right behavioura'i
traits like honesty and a positive attitude. The company believed that employees-could be trained
on all
aspects ofthe needed skill sets except inherent behavioural traits.

This hiring strategy had its own set of challenges; for example, locally hired employees had poor
communication skills (written and verbal) and a limited understanding of English, which was necessary
as
the company's intemal communications policy communications, communications from top
management and internal documentation - in English.
were
-
Page 6 9B14A065

To overcome this challenge, MF's newly recruited employees had to attend the Mahindra Finance
Academy, which was staffed by 16 full-time employees, although the academic courses were designed
and taught by professors from top Indian business schools. They also underwent an intense introduction
to the company tradition called "Rise" arrd a training program, Drona, which included an induction
program of five days, on-the-job training of 25 days and a certified course for field executives. Employees
were taught technical and soft skills, such as "how to be sensitive to local traditions," "how to access the
credit worthiness of a customer" and "how to collect loan repayments" (Exhibit 6). MF encouraged its
employees to attend short-duration executive courses from leading schools in India and abroad and
sponsored them. Deshpande emphasized the company's vision: "Don't join us as an employee you
have joined a family, be passionate. . We are a rural-based company and may diversify into new -
products, geographies, territories or finance formats, but we are here to serve rural customers' needs. You
have to continuously acquire formal degrees and qualiff in professional exams to keep up with the future
directions of Mahindra Finance, and the Mahindra Finance Academy will help you do so."

MF expected branch staff to take control of the dayto-day activities of their rural branch meeting
commercial dealers for lead generation, meeting customers, assessing the credit worthiness of-customers,
assessing the customers' integrity to repay loans, collecting back money for loan repayment and ensuring
satisfactory rural customer services. The branch manager was directed to give near total control of the
business or branch to the frontline sales persons, who were thus empowered to take risks and decide on
the spot whether a customer was credit-worthy and to disburse loans, usually within two days. Deshpande
explained: "Empowerment improves employees' entrepreneurial skills and commitment to identiff the
right type of customer. [The employee] is responsible for failures (such as if he is unable to collect money
later or if the customer tums out to be in bad debt). This gives him a sense of ownership. Wrong decisions
cannot affect employees' take-home pay; if they did, everyone would fear taking decisions. Yet, the
branch as a whole must take responsibility for thinking through decisions that affect the bottom line."

CORPORATE GOVERNANCE

On the liability side, MF initially borrowed money only from banks, but later, viewing this dependency
on one source of funding as risky since it made the company wlnerable to external environmental factors,
it started borrowing from mutual funds, insurance companies, corporations and pension funds. The costs
involved were the same. Similarly, MF expanded its finance instruments from loans to fixed term
deposits, non-convertible debentures and bonds,

MF's audit committee suggested a more internal stringent provision policy than the Reserve Bank of
India (RBI) guidelines on provisions.3 Iyer stated: "Our lower non-performing asset (NPA) is a testimony
of our model's robusbress." MF had a strong policy.on loan-to-asset value for the period for which money
was lent (Exhibits 7 and 8).

MF won many corporate govemance awards, such as the Golden Peacock Award. Understandably, it had
the best credit ratings in the industry, including the FAAA Cirisil credit rating for fixed deposits, the AA+
for long-term deposits and the P1+ for short-term deposits. However, Ravi Venkataramafl, the chief
financial officer, modestly said, "As a policy, we follow high investor relations, remain transparent and
communicate with investors on a regular basis and if one practices best corporate governance, a good
- summed up the unique strategic model by stating:
credit rating follows as a natural result." Iyer
"Mahindra Finance has evolved from an auto product financing company to a solution provider in a retail

3 to
Provision was a fund kept aside by a company to pay for /osses fhat were likely arise in the future, for example, bad
debts. The Reserye Bank of lndia is the country's central bank.
 page 7 9814A065

rural market. This is what has differentiated us from others in the market. Now, we are a benchmark for
any company that wants to establish its presence in rural India." See Exhibit 9 for MF's business model.

DEVI MEETS WTH MF

Devi was in dire need of funds and hoped that MF could consider her proposal on a priority basis. Bhatt
and Kishore visited her suburban office for physical verification in the pre-lo* pio..r, called ,,Field
Investigation," which included an intemal standard form assessing the sarrirrgs (earmng and expenditure)
of the customer. Since the inception of the business, no mandatory taxes, ru"h ur income tax, sales tax oi
servicetax, had been paid; thus, there was no authentic income proof. Also, the small landholding that she
claimed to own was in a relative's name. Devi was eaming Rs12,000 (US$200) per month profit-from her
current sole commercial van. If she purchased another two vehicles, profit *o.,td increase to Rs24,000
(US$400) per month (see Exhibit l0).

Blatt was impressed with Devi's knowledge about the market, transportation and the logistics of
pharmaceutical products, but her frm had no proper documents and geirerated a meagre profit. Bhatt
thought, "This is not a reason to leave such a good customer. With her hard work and hJwteige, she will
prove to be a good customer in the future, and I am sure about that." Since Kishore had recognized Devi
as the mother of a schoolmate, Bhatt asked him: "What is your opinion about her? Is she an etf,ical person
and would she pay back her loan amount on time?" Kishore assuied Bhatt that she had integrity.

On MF's portable handheld device, Bhatt and Kishore collected Devi's data, such as her biometrics, voice
and photograph, which were vital to handling operational risk and compliance. The device geneiated
a
l0-digit ool.oan Proposal Number," which Kishore gave to Devi. This wa-s a unique number used to track
the progress of the sanction of the proposal online by using secured access to the site or by calling a toll-
free number, which could also be used to register any grievance about the functioning of ihe MF
branch.
Devi-was- impressed with these systems and appreciated that technology was-being used for the
ltighly
benefit of the customer. When they were leaving the office, she became choked with emotion and said:

Mahindra Finance gave me a loan when the public sector bank rejected my claim, stating that I
"do not have proper loan documents and collateral." It was you and trrtatrinara FinanJe who
trusted me, my earning potential and integrity, and agreed to give me a loan in two days. I am
indebted to Mahindra Finance for life. I have no doubt about your company meeting all my
financial needs. I have only one answer Mahindra Finance and I wili recommend it to
everyone in my village. - -
Kilhore was speechless. the journey back tp the MF office, he asked himself: Although MF was
-During
defrnitely making a difference for the rural unbankable population, was the strategy 1oo risky?
Specifically, he wondered whether their decision to grant a loan to Devi was right or not, since her loan
application had been rejected by another bank after due diligence.
Page 8 9814A065

EXHIBIT 1: DETATLS OF LOAN

Hirer Name: Vimla Devi Agreement #:1704405

Vehicle Financed:Tata LPT 1613 (4x2) Total Loan Amount Rs1.285 Million
Quantity: Two Duration: 15 years
Two Vehicle Cost: Rs1.9 Million Rate of interest; 12o/o p.a.
Date & Year of Financing: December 2012 Equated monthly installment Rs15,422

Source.' Mahindra Finance intemal customer records

EXHIBIT 2: NBFGS (NON-BANKING FINANGE COMPANIES) lN INDIA

A nonbanking finance company (NBFC) in lndia is defined as any company that is engaged in loans and advances.
Yet, unlike a bank, it cannot accept demand deposits, does not form part of payment and settlement systems and
cannot issue cheques drawn on itself. NBFCs in lndia have complemented the banking sector in fulfilling the
financing need of the country's developing economy. NBFCs in lndia have witnessed unprecedented growth over the
years in terms of their numbers as well as volume. ln 2011, there were 12,409 NFBCs in lndia. Unlike public sector
banks, NBFCs have flexible structures that allow them to unbundle and customize financial services. However,
NBFCs are much smaller in size in comparison to the banks.

Source.' A. Karunagaran, "lnter-connecfedness of Banks and NBFCs in lndia: lssues and Policy lmplications," 2012,
www.rbi.org.in/scripts/PublicationsView.aspx?id=13979, accessed Apfl 21, 2013.

EXHIBIT 3: LIST OF PRODUCTS AND SERVICES OFFERED BY MF

o Tractor Loans: For a wide range of tractors of the Mahindra, Swaraj and Shaktiman brands.
r Utility Vehiclesr For Mahindra and other multi-utility vehicles.
. Car Loans: For cars and prefened financier for many car manufacturers such as M&M, Hindustan Motors,
Hyundai, General Motors and Maruti Udyog Limited.
. Gommercial Vehicle Loans: For commercial vehicles (both new and used) including trucks, buses, tippers,
excavators, three-wheeler, light commercial vehicles, etc.
o Two-Wheeler Loans: For a wide range of two-wheelers, including motorbikes, mopeds, scooters or
scooterettes; company provides loans to women customers at special rates.
r Construction Equipment Flexible loans for construction equipment (new and used).
. Refinance: Loans against a used/existing car, utility vehicle and other commercial vehicles.
r Persona! Loans: For personal needs such as marriage related expenses, children's higher education, medical
treatment, agricultural needs, etc.
. Fixed Deposit: One of the options of cumulative and non-cumulative deposits for financial savings.
. Gold Loan: 'Loan against Gold' product launched in Kerala. This offering helps to provide liquidity against gold
ornaments without having to sell them.

Source; Mahindra Finance, www.mahindrafinance.com, accessed April 21, 2013.

EXHIBIT 4: MF MILESTONES

1993 Commenced flnancino of Mahindra and Mahindra Commercial Vehicles

1999 Commenced tractor retail financing in rural and semi-urban areas
2001 Total Assets crossed the lndian Rupees 10 billion mark
2002 Commenced financinq of non'Mahindra & Mahindra vehicles
2006 Companv went public
2008 Commenced the home loan business
2011 Reached lndian Rupees 100 billion in Total Assets and ventured into SME financinq
2103 Manaoed assets worth lndian Rupees 1,03,290 Million

Source; Mahindra Finance, www.mahindrafinance.com/history-milestones.aspx, accessed Apil 21 , 2013.

 Page 9 9814A065

ExHlBlT 5A: FINANCIAL SUMMARY OF MAHINDRA FTNANCE (nUeeeS !N MILLIONS)

Particulars 2012 2011 2010 2009 2008

Estimated Value of Asset Financed 195,043 144,199 89,'154 62.812 58,497
No. of Contracts 2,024,038 1,557,622 1.189.848 973,493 815.665
Total Assets 185,616 137,541 95,150 783,493 730,282
Total lncome 279,459 201,258 '156.880 138,466 122,680
Profit Before Depreciation & Tax 9,448 7,182 5,305 3,343 2,807
Depreciation 196 157.9 99.0 87.3 87.3
Profit Before Tax 9,253 7,025 5,206 3,256 2,720
Profit After Tax 6,201 4,631 3,427 2,145 1,770
Dividend % 140 100 75 55 45
Equity Share Capital 1,027 1.025 960 957 952
Reserves & Surplus 28,483 23,856 16,314 13,722 12,176
Net Worth 29,5'10 24,880 17,274 14,679 13,129

Source.' Mahindra Finance, www.mahindrafinance.com/summary-of-resulfs.aspx, accessed April 21, 2013.

EXHIBIT 58: MF KEY FINANGIAL PERFORMANCE TNDTCATORS

Stesdy ROA
36.40 4.15%
36.r0 4,10/o
16.0s
4.05%
35,8C
dowi
35;60
33.4S 3.!ss
35.?0 3,9m(
35.0s 3.85%
34.8S 3.80v"

Increosinl ROtrlW X
RobustAsse* Qurlitv

2011 2fl,2
:,i&svBhn&w*rsge.
Ratb A6,40f, z80ffi

Cost
.to lngome = Operating !xp9n9es (inctuding Depreciation)/Net lnterest + Other lncome; ReA (Retum on Assefs/ rs
calculated based on Average Totat Asset; RONW (Retum on Ndtwoml is catculated based on Averaje NetWorth.
Source.' Mahindn Finance, www.mahindrafinance.conlpdf/presentatioi/MMFSL-Corponte_presentition_t2.pdf,
accessed
April2l, 2013.
Page 10 9814A065

EXHIBIT 6: MF EMPLOYEE ENGAGEMENT AND TRAINING

r Training programs for employees on regular basis
. Five-day induction program on product knowledge, business processes and aptitude training
r Mahindra Finance Academy training programs for prospective and existing employees at five locations
. AEsessment & Development Centre for promising employees
. Employee recognition programs
. Annual Convention Award and Achievement Box
. Participation in Mahindra Group's Talent Management and Retention program
Source; Mahindra Finance, www.mahindnfinance.com, accessed April 21, 2013.

EXHIBIT 7: MF NON-PERFORMING ASSETS ANALYSIS

Particulars (Rs. Million) FY11 FY12

Gross Non-Performinq Assets (NPA) 5,488 5,543
Less: Provisions 4,744 4.324
Net NPA 744 1,220
Total Assets (including income reversal) 't37,905 186,634
Gross NPA to Total Assets (%) 4.0% 3.0%
Net NPA to Total Assets (%) 0.SYo 0.7Yo
Coverage Ratio (%) 86.4% 78.0%

Source.' Mahindra Finance, www.mahindrafinance.com/pdf/presentation/MMFSL_Corporate_Presentation_12.pdf, accessed

April 21, 2013.

EXHIBIT 8: PROVISIONING NORMS

Duration (monthsl RBI Norms Duration lmonthsl Mahindra Finance

6 and <= 18 10% >5and<=11 1Oo/o
> 18 and <= 30 200/, > 11 and <= 24 50%
> 30 anri <= 54 30% > 24 months 1O0o/"
> 54 months 50o/o NA NA

Source; Mahindn Finance, www.mahindrafinance.com/pdf/presentation/MMFSL_Corporate_Prcsentation_12.pdf, accessed

April21, 2013.

EXHIBIT 9: KEY RISK AND MF MANAGEMENT STRATEGIES

Key Risk MF Manaqement Strateqies
Volatility in interest rates Matchino assets and liabilities
Risinq comoetition lncreasino branch network
Raisinq funds at competitive rates Maintaininq credit ratinq & improvinq asset quality
Dependence on M&M lncreasino non-M&M Portfolio
Occurrence of natural disasters lncreasinq qeoqraohical spread
Employee retention Rural employment / EmpowermenU Training
Loan repavment in cash Effective technoloqy-based control

Source; Mahindra Finance, www.mahindrafinance.com/pdf/presentation/MMFSL_Corporate_Presentation_12.pdf, accessed

Apfl 21, 201 3.

EXHIBIT 10: REVENUE AND EXPENDITURE STATEMENT OF M/S. TRIUPATIAUTOMOBILES

'100 km per day @ Rs10 per

Office-running expenditure: 5,000

Source; Mahindra Finance intemal customer records.