Capital First Strategy, Loan Growth and Profitability Trends

Section 1: The Founding of IDFC FIRST Bank.. Erstwhile IDFC BANK Continued from page 6 The bank was launched through this demerger from IDFC Limited in November 2015. During the subsequent three years, the bank developed a strong and robust framework including strong IT capabilities for scaling up the banking operations. The Bank designed efficient treasury management system for its own proprietary trading, as well as for managing client operations. The bank started building Corporate banking businesses. Recognizing the change in the Indian landscape, emerging risk in infrastructure financing, and the low margins in corporate banking, the bank launched retail business for assets and liabilities and put together a strategy to retailise its loan book to diversify and to increase margins. Since retail required specialized skills, seasoning, and scale, the Bank was looking for inorganic opportunities for merger with a retail lending partner who already had scale, profitability and specialized skills. Erstwhile CAPITAL FIRST LIMITED Continued from page 6 Between March 31, 2010 to March 31, 2018, the Company's Retail Assets under Management increased from Rs. 94 crore ($14m) to Rs. 29,625 crore ($4 b, Sep 2018). The company financed seven million customers for Rs. 60,000 crore ($8.5b) through new age technology models. The company turned around from losses of Rs. 30 crore and Rs. 32 crore in FY 09 and FY 10 respectively, to PAT of Rs. 327 crore by 2018, representing a 5 year CAGR increase of 56%. The loan assets grew at a 5 year CAGR of 29%. The ROE steadily rose from losses in 2010 to 15% by 2018. The market capitalization of the company increased ten-fold from Rs. 780 crore on in March 2012 at the time of the LBO to over Rs. 8,282 crore in January 2018 at the time of announcement of the merger. As per its stated strategy, the company was looking out for a banking license to convert to a bank. As part of its strategy to diversify its loan book from infrastructure, the bank was looking for a merger with a retail finance institution with adequate scale, profitability and specialized skills. Section 1: The Founding of IDFC FIRST Bank Erstwhile Capital First, as part of its stated strategy, was on the lookout for a commercial banking license in order to access retail deposits. 14 IDFC FIRST Bank

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